TL;DR for CAs
- Board/shareholder approvals depend on transaction type and thresholds.
- Audit committee omnibus approvals help listed companies.
- Arm's length and ordinary course are key exemptions.
What it is
Section 188 regulates certain related party transactions requiring board or shareholder approval.
Who it applies to
Companies entering contracts with related parties for goods, services, property, etc.
Key provisions
- Covered transaction types
- Thresholds for ordinary resolutions
- Exemptions for arm's length/ordinary course
Practical tips for CAs
Maintain an RPT register. Align Companies Act and LODR (for listed) calendars.
Common mistakes
Relying only on accounting related-party list; missing interested director abstentions.
For general guidance only. Verify with the latest Finance Act, GST notifications, and ICAI guidance notes before advising clients.