Related party transacations
This query is : Resolved
Sukhveer Singh
(Querist)
02 April 2019
If all directors are interested in pvt. ltd. company. How we can pass Board resoltion for realted party transactions because interested directors will not participate in board meeting. Is their any exemption for pvt. ltd. company.?
02 April 2019
Yes. Pl see notification GSR 464(E) dated 5-6-2015 - Section 188.
Sukhveer Singh
(Querist)
13 April 2019
But this exemption only for holding subsidary. In any other case we need to approval of board resolution ?
21 July 2025
You're absolutely right to flag this — let's clarify the related party transaction approval process in a Private Limited Company when all directors are interested in the transaction.
✅ Legal Framework – Section 188 of the Companies Act, 2013
Section 188 governs Related Party Transactions (RPTs). Generally, if a director is interested, he/she must not participate in the Board meeting for that resolution.
However, there’s a key exemption for private companies, provided through a notification.
📝 Exemption Notification:
Notification No. G.S.R. 464(E), dated 5th June 2015 (issued under Section 462 of the Act) provides:
“Section 188(1) shall apply with the exception that the interested director may participate in such meeting after disclosure of his interest.”
✅ This means:
In a Private Company, interested directors can participate and vote in a Board Meeting on related party transactions after disclosing their interest.
🔍 Applicability Conditions:
This exemption applies generally to all private limited companies, not just to holding-subsidiary transactions.
🚫 The confusion about restriction to holding-subsidiary comes from a separate exemption under Section 2(76), but not for Section 188.
✔️ Conclusion:
If all directors in a Private Limited Company are interested in a related party transaction:
You can still pass a board resolution,
Interested directors can participate and vote,
Disclosure of interest must be made before the resolution is passed.
🛑 Note:
This does not apply to public companies — they must comply fully with Section 188 and abstain from participation if interested.
✅ Legal Framework – Section 188 of the Companies Act, 2013
Section 188 governs Related Party Transactions (RPTs). Generally, if a director is interested, he/she must not participate in the Board meeting for that resolution.
However, there’s a key exemption for private companies, provided through a notification.
📝 Exemption Notification:
Notification No. G.S.R. 464(E), dated 5th June 2015 (issued under Section 462 of the Act) provides:
“Section 188(1) shall apply with the exception that the interested director may participate in such meeting after disclosure of his interest.”
✅ This means:
In a Private Company, interested directors can participate and vote in a Board Meeting on related party transactions after disclosing their interest.
🔍 Applicability Conditions:
This exemption applies generally to all private limited companies, not just to holding-subsidiary transactions.
🚫 The confusion about restriction to holding-subsidiary comes from a separate exemption under Section 2(76), but not for Section 188.
✔️ Conclusion:
If all directors in a Private Limited Company are interested in a related party transaction:
You can still pass a board resolution,
Interested directors can participate and vote,
Disclosure of interest must be made before the resolution is passed.
🛑 Note:
This does not apply to public companies — they must comply fully with Section 188 and abstain from participation if interested.
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