Omnibus Approval for Related Party Transactions: Format with Specimen Resolutions and Clauses Explained

Omnibus Approval explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.

Companies that trade regularly with group entities cannot send every invoice to the Audit Committee. The Companies Act allows the committee to grant an omnibus approval for related party transactions that the company proposes to enter into, on conditions set by rule 6A of the Companies (Meetings of Board and its Powers) Rules, 2014. This guide gives the specimen Board and Audit Committee resolutions, explains each clause, and sets out what rule 6A requires: the criteria, the contents of the approval, the one-year limit and the transactions that cannot be covered. If you need the resolutions, the criteria note and the quarterly review format prepared together, our compliance documentation service can do it.

Section 177(4)(iv) lets the Audit Committee approve related party transactions and, under its first proviso, make an omnibus approval on prescribed conditions. Under rule 6A, the committee first obtains the Board's approval of the criteria for omnibus approval, then grants the approval naming the related parties, the nature and duration of the transactions, the maximum amount, the indicative base price and price-variation formula. The approval is valid for a period not exceeding one financial year and needs fresh approval afterwards (rule 6A(5)), and it cannot cover the sale or disposal of the undertaking of the company (rule 6A(6)). Where a need cannot be foreseen, the committee may approve such transactions up to rupees one crore per transaction.

When you need an omnibus approval

All related party transactions need Audit Committee approval; the rule 6A opening line says so. Where transactions repeat, such as purchase of raw material from a group company, rent for shared premises or shared service charges, approving each one separately is slow. An omnibus approval lets the committee approve a class of transactions in advance for up to one year, within a maximum value, and review the actual transactions at intervals.

The approval does not replace the other approvals. Section 188(1) separately requires the Board's consent by a resolution at a meeting for the listed kinds of contract with a related party, and a members' resolution where the first proviso applies; section 188's later provisos exclude ordinary-course transactions on an arm's-length basis and transactions between a holding company and its wholly owned subsidiary whose accounts are consolidated, and the second proviso bars related party members from voting. See related party transactions: section 188 and how to approve a related party transaction.

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Specimen resolutions

An omnibus approval has two steps: the Board approves the criteria, and the Audit Committee grants the approval using those criteria. The first specimen is the Board resolution; the second is the Audit Committee resolution.

Part A: Board resolution approving the criteria

CERTIFIED COPY OF RESOLUTION PASSED AT THE MEETING OF THE BOARD OF DIRECTORS OF  (CIN ) HELD ON 

ITEM : CRITERIA FOR OMNIBUS APPROVAL OF RELATED PARTY TRANSACTIONS FOR THE FINANCIAL YEAR 

The Chairperson placed before the Board the proposal of the Audit Committee on the criteria for omnibus approval of related party transactions, with the list of repetitive transactions the Company expects to enter into during the financial year  and the reasons why omnibus approval is needed.

"RESOLVED THAT pursuant to section 177(4) and section 188 of the Companies Act, 2013 and rule 6A of the Companies (Meetings of Board and its Powers) Rules, 2014, the Board approves the following criteria for omnibus approval of related party transactions by the Audit Committee for the financial year :

(a) the maximum aggregate value of the transactions that may be allowed under omnibus approval in the year: Rs. ;

(b) the maximum value per transaction that may be allowed: Rs. ;

(c) the extent and manner of disclosure to be made to the Audit Committee when it is asked for omnibus approval: ;

(d) review by the Audit Committee, at intervals of , of the related party transactions entered into under each omnibus approval;

(e) transactions that cannot be subject to omnibus approval: the sale or disposal of the undertaking of the Company, .

RESOLVED FURTHER THAT the Audit Committee shall take into account the repetitive nature of the transactions, past and expected, and the justification for omnibus approval, and shall satisfy itself that the approval is in the interest of the Company.

RESOLVED FURTHER THAT the Company Secretary be authorised to place these criteria before the Audit Committee and to do all things needed to give effect to this resolution."

Certified true copy

For 
Name:     Designation:     Date: 

Part B: Audit Committee resolution granting the approval

CERTIFIED COPY OF RESOLUTION PASSED AT THE MEETING OF THE AUDIT COMMITTEE OF  HELD ON 

ITEM : OMNIBUS APPROVAL OF RELATED PARTY TRANSACTIONS FOR THE FINANCIAL YEAR 

The Committee noted the criteria approved by the Board on , the list of proposed transactions, the reasons why omnibus approval is needed, and the facts that the transactions are repetitive and that approval is in the interest of the Company.

"RESOLVED THAT pursuant to section 177(4)(iv) of the Companies Act, 2013 and rule 6A of the Companies (Meetings of Board and its Powers) Rules, 2014 , and within the criteria approved by the Board, omnibus approval be and is hereby granted, for the period from  to  (not exceeding one financial year), for the following related party transactions:

Schedule of transactions

1. Related party:     Relationship: 
   Nature of transaction: 
   Duration: 
   Maximum amount for the year: Rs. ; maximum per transaction: Rs. 
   Indicative base price or current contracted price: 
   Formula for variation in price, if any: 
   Other information relevant to the decision: 

2. Related party:  ... 

RESOLVED FURTHER THAT, for transactions whose need could not be foreseen and the above details are not available, approval is granted subject to a value not exceeding Rs.  per transaction, and the details shall be placed before the Committee at its next meeting.

RESOLVED FURTHER THAT this approval does not extend to the sale or disposal of the undertaking of the Company and expires on , after which fresh approval shall be sought.

RESOLVED FURTHER THAT the management shall place before the Committee, at intervals of , a statement of the related party transactions entered into under this approval, for its review and noting.

RESOLVED FURTHER THAT , Chief Financial Officer, and , Company Secretary, be authorised severally to take all steps needed to give effect to this resolution."

Certified true copy
For 
Name:     Designation:     Date: 

Clause-by-clause explanation

The law behind the approval

Section 177(4)(iv). The Audit Committee's terms of reference include approval or any subsequent modification of transactions of the company with related parties. The first proviso says the Audit Committee may make omnibus approval for related party transactions proposed to be entered into by the company, subject to prescribed conditions. Another proviso says that where a transaction involving an amount not exceeding one crore rupees is entered into by a director or officer without the Audit Committee's approval and the committee does not ratify it within three months of the transaction, the transaction is voidable at the option of the committee, and if it is with a related party to a director or authorised by any director, that director must indemnify the company against loss. A further proviso says that clause does not apply to a transaction, other than a section 188 transaction, between a holding company and its wholly owned subsidiary. See section 177.

Rule 6A. The Audit Committee, after obtaining the approval of the Board, specifies the criteria: maximum aggregate value in a year, maximum value per transaction, the extent and manner of disclosures to the committee, review at intervals the committee considers fit, and transactions that cannot be subject to omnibus approval (6A(1)). It considers repetitiveness and justification (6A(2)) and satisfies itself that the approval is in the interest of the company (6A(3)). The approval must contain or indicate the names of the related parties, the nature and duration of the transaction, the maximum amount, the indicative base price or current contracted price and the price-variation formula, and any other relevant information (6A(4)); where the need cannot be foreseen and details are unavailable, the committee may approve such transactions up to rupees one crore per transaction. The approval is valid for a period not exceeding one financial year (6A(5)) and cannot be made for the sale or disposal of the undertaking (6A(6)). The committee may add other conditions (6A(7)). See rules 5, 6 and 6A.

Section 188. The Board's consent by resolution at a meeting, and in the cases covered by the first proviso a prior members' resolution, are needed for the listed contracts with related parties, subject to the provisos for ordinary-course, arm's-length and holding-wholly-owned subsidiary transactions. A contract entered into without that consent or approval and not ratified within three months is voidable at the option of the Board or the shareholders (188(3)). The Board's report must refer to each contract with the justification (188(2)). See section 188 and rule 15: thresholds and disclosures. For the filing of the contracts, see Form AOC-2.

Listed companies. A listed company must also meet the listing regulations on related party transactions; the model resolution used in practice cites regulation 23(3) and limits omnibus approval to independent members of the committee. Those conditions are outside this article, and the current regulations should be checked; see related party transactions: SEBI rules.

Stamp duty, registration and execution

The resolutions are not chargeable with stamp duty and are not registered. If the underlying contracts are agreements, check duty under the Stamp Act and Schedule of the State where each is executed; see stamp duty on legal documents, State-wise.

Execution steps: draw up the list of repetitive transactions and the justification; place the criteria before the Board; pass the Board resolution; place the proposal before the Audit Committee; pass the committee resolution with the schedule; diarise the expiry date; present the quarterly review statements; and prepare for fresh approval before the year ends.

Common mistakes

• Granting omnibus approval without the Board's approval of the criteria.
• Leaving out one of the particulars rule 6A(4) requires, such as the price base or the variation formula.
• Letting an approval run beyond one financial year.
• Covering the sale or disposal of the undertaking.
• Using the one-crore unforeseen-need limit for transactions that were predictable.
• Skipping the periodic review.
• Treating the omnibus approval as a substitute for the Board's consent under section 188.
• Letting a related party member vote on a members' resolution where the second proviso to section 188(1) bars it.

Need help with omnibus approval?

We prepare the Board criteria, the committee resolution with its schedule, the quarterly review format and the section 188 approvals, and diarise the expiry. Start with our compliance documentation service.

Key takeaways

• The Audit Committee may grant omnibus approval for related party transactions after the Board approves the criteria.
• The approval must name parties, nature, duration, maximum amount, base price and variation formula.
• It is valid for a period not exceeding one financial year and does not cover the sale or disposal of the undertaking.
• Unforeseen transactions can be approved only up to rupees one crore each.
• Section 188 approvals run alongside; omnibus approval does not replace them.

Read next

• Rules 5, 6 and 6A: resolution by circulation, committees and omnibus approval
• Related party transactions: section 188 guide
• Board resolution for approving a related party transaction
• Audit Committee: constitution under section 177 and rule 4

Disclaimer: This specimen is a general model for information. Every document must be adapted to its facts and to the law, rules and forms in force when it is signed or filed; stamp duty, registration and court fees depend on the State and the forum. This article is general information, not legal advice; check the official text before acting.