Related Party Transactions Under Section 188: Approval and Evidence Checklist
Related-party transactions are not automatically prohibited, but they need identification, approval and evidence. The weakest RPT file is one that starts after the auditor asks for details.
For broader context, see the Companies Act, MCA and Startup Compliance Hub.
Section 188 transaction types
Section 188 covers specified contracts or arrangements with related parties, including sale/purchase/supply of goods or materials, property transactions, leasing, services, appointment to office/place of profit and underwriting, subject to conditions.
For the connected rule, example or next step, see Related-Party Transactions in Listed Companies: Investor Red Flags | Finin2min Investor Protection.
RPT control table
| Control | Why it matters |
|---|---|
| Related-party master list | Identifies covered parties before transaction. |
| Ordinary course assessment | Supports whether transaction falls within routine business pattern. |
| Arm's length evidence | Pricing, quotations, comparable terms or valuation support. |
| Board/shareholder approval review | Check whether approval threshold and route apply. |
| Register and financial statement disclosure | Connect secretarial and accounts records. |
For the connected rule, example or next step, see LLP Related-Partner Transactions: Documentation File for Partners and Relatives.
Practical workflow
- Update related-party list from director disclosures and group structure.
- Tag vendor/customer ledgers as related party where relevant.
- Get approval before contract execution where required.
- Keep pricing evidence and board note.
- Reconcile RPT schedule with financial statements and audit file.
Finin2min warning
Official sources used
This article is intentionally source-limited to official MCA / India Code material. Verify final filing positions with the latest Act, Rules, MCA forms and portal advisories before publishing.
- India Code: Companies Act, 2013 — Section 188 Related Party Transactions
- India Code: Companies Act, 2013 — Section 184 Disclosure of interest by director
- India Code: Companies Act, 2013 official PDF
For the connected rule, example or next step, see Significant Beneficial Owner Under Section 90: BEN-2 Risk Checklist.
FAQs
Section 188 covers specified related-party contracts and arrangements.
No. They must be identified, approved and supported as required by law.
Comparable quotes, pricing policy, valuation, board note and actual business rationale help.
Source and review trail
Use the current official instrument, portal or regulator publication before acting. This panel separates the category authority from page-specific references.
- Primary category
- Companies Act & MCA
- Official starting point
- www.mca.gov.in