RPT Compliance Software for Company Secretaries: Related Party Transactions – Section 188

Section 188 of the Companies Act, 2013 governs Related Party Transactions (RPTs). All RPTs require board approval; transactions exceeding prescribed thresholds need prior shareholder approval. Interested directors must recuse themselves. RPT compliance software automates board resolutions, EGM notices, explanatory statements, and board report disclosures.

Companies Act 2013 Provisions – Section 188 & Rule 15

Section 188 mandates board approval for any contract or arrangement with a related party. Covered transactions include sale/purchase of goods, property, leasing, services, appointment to office of profit, and underwriting. Transactions exceeding prescribed limits require prior shareholder approval via ordinary resolution; related parties cannot vote. Rule 15 prescribes procedural requirements. Every RPT must be disclosed in the Board Report (Section 134(3)(h)) with justification.

• Board resolution (interested directors recused)
• EGM notice and ordinary resolution (if shareholder approval required)
• Explanatory statement (Section 102)
• Board report disclosure text

Documents Required for RPT Compliance

• Board meeting notice and resolution
• EGM notice (if shareholder approval needed)
• Ordinary resolution for RPT approval
• Explanatory statement with material facts
• Board report disclosure (Section 134(3)(h))

Manual vs Automated RPT Document Drafting

RPT documents require careful handling of recusal language, material facts, and board report disclosure. Manual drafting often leads to inconsistent recusal wording or incomplete disclosure.

• Manual: 2–4 hours; recusal and disclosure language varies by drafter
• Automated: 20–40 minutes; consistent recusal and disclosure language
• Manual: Explanatory statement drafted from scratch with transaction details
• Automated: Pre-built structure with transaction value, pricing, justification

Software Automation Process for RPT Compliance

1. Select company – Company details load from master database.
2. Enter related party details – Name, relationship (director/KMP/relative), address, PAN, DIN.
3. Enter transaction details – Type, description, value, pricing basis, transaction date.
4. Enter meeting details – Board meeting date/time/venue, EGM date/venue if shareholder approval needed.
5. Enter interested directors – Names of directors who will recuse.
6. Enter disclosure justification – Use AI or manual text for board report disclosure.
7. Generate documents – Board notice, board resolution, EGM notice, ordinary resolution, explanatory statement, board report disclosure, compliance checklist.

How RPT Compliance Software Automates Drafting

RPT compliance software generates board notices, resolutions with recusal language, EGM notices, explanatory statements with transaction details, and board report disclosure text. AI-assisted drafting can tailor justification and material facts. Use with AGM/EGM software and directors report software. See the full event-based compliance guide.