‘Omnibus Approval’ under the Companies Act, 2013

The Ministry of Corporate Affairs had vide Notification dated 14^th December, 2015 amended the Companies (Meetings of Board and its Powers) Rules, 2014so as to prescribe the conditions for Omnibus Approval for related party transactions on annual basis. Earlier in the year on 25^th May, 2015, the Central Government had vide Companies (Amendment) Act, 2015 amended the Companies Act, 2013 and had expressly empowered Audit Committee of prescribed classes of Public Companies to grant omnibus approval for related party transactions proposed to be entered into by the subject to such conditions as may be prescribed.

As per Section 177 read with Rule 6 of Companies (Meetings of Board and its Powers) Rules, 2014 following classes of companies needs to constitute an Audit Committee:

(1)   Listed Company

(2)   Public Companies with a paid up capital of Rs. 10 Crore or more

(3)   Public Companies having a turnover of Rs. 100 Crore or more

(4) Public Companies having in aggregate outstanding loans or borrowings or debentures or deposits exceeding Rs. 50 Crore or more

Listed Companies already have similar conditions in SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.The comparative of both the statutes goes as follows:

Sr. No.	Particulars	LODR	Companies Act, 2013
(1)	Authority to approve Criteria for making omnibus approval	Audit Committee	Audit Committee + Board of Directors
(2)	Criteria	Shall be in line with RPT policy of the Company	Lays down minimum (5) criteria
(3)	Review of approved Omnibus RPT by Audit Committee	Quarterly basis	At such intervals as the Audit Committee may deem fit
(4)	Validity of Omnibus approved RPT	One year	One Financial Year
(5)	Prohibited transactions via Omnibus approval	No such prohibition	Selling and disposing of the undertaking of the Company.
(6)	General Exemption	Transactions between Hold. Co. and WOS whose accounts are consolidated with Hold Co. AND placed before the shareholders for their approval	No such exemption available

Needless to say, Inc.is expected to be professionals to match up the pace of the changing regulations. Accordingly, illustratively, Listed Companies shall check (i) whether the criteria laid down by their Audit Committee has been approved by the Board?; (ii) whether the criteria adopted by the Audit Committee covers minimum criteria laid down under Companies Act, 2013; (iii) whether the omnibus approvals made by the Audit Committee are still valid or are due to expire shortly?. On a similar line unlisted Public Companies need to start from the scratch and ensure compliance with the new Rule on Omnibus approvals.