The Continuation Rule
A Section 188 approval is transaction-specific and term-specific. If the approval was for a contract with a defined term, the approval continues for that term, even if the counterparty becomes a related party of the transferee through the scheme. The MCA circular supports this continuation for pre-commencement contracts, and the same logic applies to post-commencement approvals with a fixed term.
The Modification Trigger
Any modification of the contract—price, scope, tenure, or parties—triggers a fresh Section 188 approval. The transferee cannot rely on the transferor’s approval for a modified arrangement. The scheme should identify the RPT contracts that will continue and the contracts that will be modified or terminated.
The New Contracts
New contracts with the transferor’s related parties require fresh approval. The transferee’s audit committee should review the proposed contracts and grant approval before they are executed.
Call to Action: For Section 188 approval continuity review, RPT contract mapping, or audit committee approval, contact office@anujdesaiassociates.com or 9619456656. Website: https://anujdesaiassociates.com. LinkedIn: linkedin.com/in/ca-anuj-desai-122547230.