The corporate affairs ministry has ruled out defining the term 'ordinary course of business', used several times in the Companies Act, 2013. This, experts say, might lead to confusion and litigation.
"We are not going to define the 'ordinary course of business'. Companies will have to do it themselves," said a senior ministry official, asking not to be named.
Though the term has been used at various places in the new companies law, it has primarily drawn attention because of its significance in cases of related-party transactions.
According to the new legislation, if a related-party transaction is not part of a company's 'ordinary course of business', besides a few other conditions, it will need to get approvals from the board of directors and the audit committee. Also, if a transaction is 'material', it requires approval of 75 per cent of minority shareholders.
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