LMN Ltd. having paid up share capital of ₹ 35 crores proposes to enter into a contract with Amesh, who is a brother of Anil Kumar for procurement of semi finished goods for an amount of ₹ 7 crore during the financial yea

Under Section 188 of the Companies Act, 2013 read with Rule 15 of the Companies (Meetings of the Board & its Powers) Rules, 2014, in addition to the approval of Board of Directors, prior approval of members by means of a resolution would also be required for sale, purchase or supply of any goods or material, directly or through appointment of agent, amounting to 10% or more of the turnover of the company. The contract referred to in instant case, is a contract for procurement of semi-finished goods. Further, if Amesh is a related party to the Company (assuming Anil Kumar is a director or KMP, making his brother Amesh a related party), then this contract shall not be entered into except with the consent of the Board of Directors given by a resolution at a meeting of the Board. However, in the event that the total value of the Contract with a Related Party is equal to 10% or more of the Turnover of the company, then, in addition to the approval of Board of Directors, prior approval of members by means of a resolution passed at a general meeting would also be required before entering into such a contract. The details of contract or arrangement entered into shall also be referred to in the Board's report to the shareholders along with the justification for entering into such contract.