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  • Audit Committee Note and Board Resolution: Related-Party Purchase from an MSE Supplier
  • Mehak Chanotiya
  • img October 10, 2026

Audit Committee Note and Board Resolution: Related-Party Purchase from an MSE Supplier

When used: Used where a company buys from a group or related MSE supplier. It records the approval under company law and the confirmation that the MSMED Act terms are met.

NOTE FOR APPROVAL OF THE AUDIT COMMITTEE / BOARD

Particulars

Details

Related party and nature of relationship

[Name; relationship; director or KMP interested]

Nature, duration and material terms of the contract

[Goods/services; period; pricing basis]

Value of the transaction (annual / aggregate)

₹ [____]

Basis for arm’s-length pricing

[Benchmarking, quotations from unrelated vendors, other basis]

Supplier’s Udyam category and registration date

[Micro / Small / Medium]; [__/__/____]; certificate verified on [date]

Payment term (written, not exceeding 45 days)

[__] days from acceptance or deemed acceptance

Terms compared with unrelated MSE suppliers

[Same / different; reasons]

Interested persons who will not take part

[Names]

 

RESOLUTION

“RESOLVED THAT, on the recommendation of the Audit Committee and the Board being satisfied that the terms are on arm’s-length basis and in the ordinary course of business [or: subject to the approval of members], the transaction with [related party] for [description], for a value of ₹ [____] [per annum], on the terms placed before the meeting, be and is hereby approved.

RESOLVED FURTHER THAT the Finance Head confirm quarterly to the Audit Committee that payments to the related party have been made within the period in the written agreement and in compliance with sections 15 and 16 of the MSMED Act, 2006, wherever the related party is a micro or small enterprise.”

Directors interested in the transaction did not participate or vote on this item.

 

Drafting notes

•      Approval thresholds, omnibus approval and shareholder approval depend on the Act, the rules and, for a listed company, Regulation 23. Check the current text and your Articles before use (Article 10).

•      The MSMED confirmation does not replace the related-party approval, and the related-party approval does not settle the supplier’s MSE status (Article 10).

•      Enter the transaction in the related-party disclosures required by the applicable accounting standard.

Author Bio
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Mehak Chanotiya

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CS Trainee dedicated to mastering the nuances of Indian corporate law and secretarial practice. View Full Profile

My Published Posts
→ Board Resolution for Onboarding on a TReDS Platform → Buyer’s Written Objection to Acceptance of Goods or Services View More Published Posts

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