Govt allows omnibus approvals for related party transactions

Allowing more leeway for corporates, the government has allowed "omnibus approval" of related party transactions by companies' audit committees.
Such approvals would be subject to certain conditions, including the maximum aggregate value of transactions which can be allowed under this route in a particular year.
In this respect, the Corporate Affairs Ministry has issued Companies (Meetings of Board and its Powers) Second Amendment Rules, 2015.
"All related party transactions shall require approval of the Audit Committee and the Audit Committee may make omnibus approval for related party transactions proposed to be entered into by the company," the Ministry said.
Besides, the audit committee is required to decide the maximum value per transaction that can be allowed through the omnibus route, extent of disclosures that need to be made at the time of seeking approval.

"Omnibus approval shall be valid for a period not exceeding one financial year and shall require fresh approval after the expiry of such financial year," the Ministry said.

Further, approvals through the omnibus route would not be allowed for transactions in respect of selling or disposing of the undertaking of the company.
In situations, where the need for related party transactions cannot be foreseen, the audit committee can allow omnibus approval provided that value of each transaction does not exceed Rs 1 crore.
While putting in place the criteria for making such approvals, the Ministry said the audit committees should take into account factors such as "repetitiveness of the transactions (in past or in future) and justification for the need of omnibus approval".

At intervals, the audit committee would have to review related party transactions entered into by the company following each omnibus approval, as per the rules.