Reviewed by Finin2min Editorial Desk · Last reviewed 11 August 2026
Check Board and member approval for common section 188 transaction categories using Rule 15 thresholds.
Screen a related-party transaction
Listed companies and audit-committee provisions can impose broader approval and materiality rules.
Board approval
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Member approval
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How This Is Calculated
For a related-party transaction outside the combined ordinary-course and arm’s-length exemption, section 188 screens Board approval. Rule 15 member-resolution thresholds for goods/services/lease are10% or more of preceding-year audited turnover; property uses10% or more of audited net worth. Office/place-of-profit remuneration must exceed ₹2.5 lakh per month; underwriting remuneration must exceed1% of net worth. Apply same-category annual aggregation where prescribed and establish any class-specific exemption.
Frequently Asked Questions
Do all related-party transactions need shareholder approval?
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No — board approval is always needed for related-party transactions, but shareholder approval is only additionally required once the transaction value crosses the specific materiality threshold for that transaction type, which differs by category (goods/services, property, underwriting, office of profit).
Why does the materiality threshold differ by transaction type?
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Because different transaction types are measured against different bases that best reflect their relative significance — turnover-based for goods/services/lease transactions, net-worth-based for property and underwriting, and a flat rupee threshold for office-of-profit appointments, which don't scale naturally with company size.
For non-ordinary/non-arm’s-length related goods purchases with preceding-year turnover ₹1 crore, exactly ₹10 lakh reaches the 10% member-resolution threshold. A ₹6 lakh transaction plus ₹4 lakh of other same-year goods transactions reaches it too. Ordinary course and arm’s length must both be established to use that section 188 exemption.
Scope: Checks the approval requirement (board vs shareholder/audit committee) for a related-party transaction under Section 188 of the Companies Act, 2013, based on the transaction type and value thresholds.
Calculation logic
Determine whether the counterparty qualifies as a 'related party' under the Section 2(76) definition (director, key managerial personnel, their relatives, firms/private companies where they are partners/members/directors, holding/subsidiary/associate companies, and other specifically listed relationships).
Check whether the transaction (sale/purchase of goods or property, leasing of property, availing/rendering of services, appointment to an office of profit, underwriting of securities, etc.) falls within the currently prescribed value thresholds that trigger the requirement for prior special resolution approval by shareholders (in addition to the mandatory board/audit-committee approval that applies regardless of value for related-party transactions generally).
Where the transaction is in the ordinary course of business AND on an arm's length basis, flag that Section 188's specific approval requirements do not apply (this is the key statutory carve-out) — but note that audit-committee approval requirements under Section 177 (for listed/prescribed companies) and SEBI LODR disclosure requirements (for listed companies) may still separately apply even to ordinary-course arm's-length transactions.
Inputs and assumptions
Value thresholds triggering the shareholder special-resolution requirement follow the current Companies (Meetings of Board and its Powers) Rules.
'Ordinary course of business' and 'arm's length basis' are fact-specific determinations (not bright-line tests) — the checker applies the statutory carve-out only where the user confirms both conditions are genuinely satisfied, flagging that this determination often requires documented board/audit-committee assessment rather than a simple checkbox.
Exclusions and edge cases
Interested directors/members cannot vote on the resolution approving a related-party transaction in which they are interested — this checker addresses the approval-route determination, not the specific voting-exclusion mechanics for a given board/general meeting.
Listed companies have additional, generally stricter SEBI LODR-specific related-party-transaction thresholds and disclosure requirements (including materiality thresholds distinct from the Companies Act ones) — this checker addresses the Companies Act Section 188 requirement specifically; listed companies should separately verify LODR compliance.