Related party transaction

This query is : Resolved

vijaylakshmi rathi (Querist)
Follow

21 August 2014 If a company deals at arms length price, i.e, in the ordinary course of business then will it still has to take shareholders approval?

CS,CA F,Numrologi TusharSampat

CS,CA F,Numrologi TusharSampat (Expert)
Follow

21 August 2014 the ans depends upon which transaction u undertaking

Message likes : 1 times

vijaylakshmi rathi

vijaylakshmi rathi (Querist)
Follow

21 August 2014 transactions that are taken in ordinary course of business at arms length price

Aashok Kumar Sharma online

Aashok Kumar Sharma online

(Expert)
Follow

21 July 2025 Under Section 188 of the Companies Act, 2013, if a related party transaction (RPT) is:

In the ordinary course of business, and
At an arm’s length price,
➡️ Then shareholders’ approval is not required.

✅ Legal Position (as per Section 188):
“No approval of the Board or shareholders shall be necessary for any transaction entered into by the company in its ordinary course of business and on an arm's length basis.”
🧾 However, keep in mind:
Board approval is still required (via resolution at a Board Meeting) unless exempted (e.g. in private companies under certain conditions).
The company must disclose such transactions in its financial statements and directors’ report under AS-18 (now Ind AS-24, if applicable).
Arm’s length price should be justifiable — proper documentation or benchmarking (especially for tax scrutiny or audit) is advisable.
🛑 Shareholders’ Approval is required if:
The transaction exceeds specified limits under Rule 15 of the Companies (Meetings of Board and its Powers) Rules, 2014, and
The transaction is not at arm’s length or not in the ordinary course of business.
✔️ Conclusion:
If the RPT is both:

in the ordinary course of business, and
at an arm’s length price,
➡️ then shareholders’ approval is NOT required.

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now

Similar Resolved Queries

Unanswered Queries

Popular
Recent

Trending Online Classes

Direct Tax Laws & International Taxation May 26,Sept 26 & Jan 27

CA Arvind Tuli

Enroll Now
Audit Fast Track Recorded Batch For May 26,Sept 26 & Jan 27

CA Aarti Lahoti

Enroll Now
DT & Audit (Exam Oriented Fastrack Batch) - For May 26 Exams and onwards Full English

CA Bhanwar Borana & CA Shubham Keswani

Enroll Now

view all classess

Meet our CAclubindia PRO Members

Krishnaveni karur

ashvini tripathi

Suranjan Das

saurabh sawlani

Richa Bajoria

Subscribe Now

Related party transaction

Similar Resolved Queries

Trending Online Classes

Meet our CAclubindia PRO Members

Quick Links

Browse by Category

Latest Job Openings

GST CONSULTANCY

Manager- Finance and Compliance

Senior Executive

CA Final

GST CONSULTANT

Accountant