06 December 2013
The loan taken from director will not be considered as deposit. Liberty is only upto director and not their relative.
Loan taken from relative of director will be treated as deposit.
As per my understanding of reading Rule 2(b) (ix) of the Companies (Acceptance of Deposits) Rules 1975, deposits received from directors by public company or private company or deposits received from shareholders by a private company will be exempted from the purview of deposit. However such deposit has not made out of borrowed funds.
Private Company is prohibited to accept any invitation or acceptance of unsecured loans/deposits from the persons other than its members, directors or their relatives. Therefore a private company can accept deposits through private arrangement from its members, directors and their relatives.
Rule 2(b)(ix) exempt any unsecured loan money received from directors and shareholders from the definition of deposits. According to Rule 2(b)(ix), any amount received from members of a private company limited by guarantee are not exempt.
06 December 2013
Rule 2(B) (ix) of the the Companies (Acceptance of Deposits) Rule, 1975 is defind as follow:
“Any amount received by a private company from a person who at the time of the receipt of the amount, was a director, relative of director or member.”
In exercise of the powers conferred by Section 58A read with sub-clauses (a) and (b) of Sub-section (1) of Section 642 of the Companies Act, 1956 (1 of 1956), the Central Government, in consultation with the Reserve Bank of India, hereby makes the following rules further to amend the Companies (Acceptance of Deposits) Rules, 1975, namely:-
1 . Companies (Acceptance of Deposits) Amendment Rules, 2004.-
1.Short Title and Commencement - (1) These rules may be called the Companies (Acceptance of Deposits) Amendment Rules, 2004.
(2) They shall come into force on the date of their publication in the Official Gazette.
2. In rule 2 of the Companies (Acceptance of Deposits) Rules, 1975, in clause (b), for sub-clause (ix), the following sub-clause shall be substituted, namely:-
" (ix) any amount received from a person who, at the time of the receipt of the amount, was a director of the company or any amount received from a relative of a director or its member by a private company :
Provided that the director, relative of a director or member, as the case may be, from whom money is received, furnishes to the company at the time of giving the money, a declaration in writing to the effect that the amount is not being given out of funds acquired by him by borrowing or accepting from others".
After this amendments in this rule as on 12/03/2004 the public company can take money from its director because the word private company has been replace in this sub clause by the word “ the Company”.
07 December 2013
THANKS A LOT AJAY JI.... plz solve below mention query :-
how much maximum salary can private company pay to relative of directors....as per my knowledge limit is 50000 per month.. but can we pay more salary if relative of directors having engineering degree.. plz solve
07 December 2013
Circumstances under which section 314(1B) is applicable and consent of Central Government is required:
As per section 314(1B) certain persons as given below cannot hold office or place of profit carrying the remuneration of Rs. 2,50,000 p.m. or more in the company, unless special resolution to that effect has been passed in the general meeting of the company and prior approval of the Central Government has been obtained:— 1. any partner of the firm in which director of the company is also a partner; 2. any relative of a director of the company; 3. any firm in which a director or his relative or both are partner; 4. any private company in which director of the company is holding office of director or member; 5. any director/manager of a private company in which director of the company is holding office of director or member. Provision of section 314(1B) shall not apply to any appointment of firm of solicitors/advocates, if they are appointed to give advise and are consulted by the company in its work on case to case basis. Therefore, any remuneration or fee received by a professional director as advocates/solicitors for appearing in a Court of Law or Company Law Board/Tribunal in pleading on behalf of the company will not come under the provisions of the section as mentioned above.
07 December 2013
NEW RULES ON DIRECTOR’S RELATIVE (OFFICE OR PLACE OF PROFIT) RULES, 2011 The MCA has issued a Notification No. G.S.R. 357(E) dated 02.05.2011: In exercise of the power conferred by clause (b) of sub-section (1) of Section 642, read with sub-section (1B) of section 314 of the Companies Act, 1956, the Central Government hereby makes the following Rules in supersession of the earlier Notification No. 89(E) dates 05.02.2003,namely:- 1. Short Title and Commencement: (1) These rules may be called Director’s Relative (Office or Place of Profit) Rules, 2011. (2) They shall come into force on the sate of their publication in the official gazette. 2. Applicability: These rules shall apply to all companies registered under the Companies Act, 1956 except as provided in these rules. 3. Approval of the Central Government in case of Appointment of Relatives, etc. of Directors: No appointment for an office, or place of profit in a company shall take effect unless approved by the Central Government on an application, in respect of :- (a) Partner of firm or relative of a Director or Manager, or (b) Firm in which such Director, or Manager or relative of either is a partner; or (c) Private company of which such Director, or Member or relative of either is a Director or member, which carries a monthly remuneration exceeding, Rs. 2,50,000 p.m. (c ) An individual who is a relative of a director, or Manager and is appointed as an Advisor or Consultant and paid remuneration including commission on periodical basis. 4. Selection of Relatives of Directors and Directors and Directors to Hold a Place of Office/Profit:- (a) The selection and appointment of a relative of a Director for holding office or place of profit in the company with the salary exceeding Rs. 250000 p.m. shall be approved by adopting the same procedure applicable to non-relatives and approved by Selection Committee. Explanation: For the purpose of the sub-rule, in the case of listed public companies, the expression “Selection Committee” means a committee, consisting of at least three members, the majority of which shall be independent director and an outside expert. Provided that in case of unlisted companies, Independent director are not necessary but outside expert should be their in the Selection Committee. Provided further that in the case of private companies, Selection Committee is not necessary. 5. Procedure for Examination of Application: The application under rule 3 shall be examined with respect to the following, in addition to all other requirements under the Companies Act, 1956, 1956:- (a) In the case of Individual appointee, an undertaking from him that he/she will be in exclusive employment of the company and will not hold a place of profit in any other company. (b) The monitory value of all allowances and perquisites and of total remuneration package (monthly/annually) proposed to be paid to the appointee and details of the services that will be rendered by him to the company. (c) Details of shareholding pattern particularly the shareholding of the directors along with his/her/their relatives, the public holding, the institutional holding (each institution separately) and the quantum of dividend paid by the company during the last three preceding financial years. (d) Details of educational qualification/experience, pay scale, allowances and other benefits of similarly placed executives. (e) In case of the appointment of a relative, an undertaking from the Director/Secretary of the Company that the similarly placed employees are getting the comparable salary. (f) List and particulars of the employees who are in receipt of remuneration of Rs. 250000 or more per month. (g) The total number of relatives of all the Directors either appointed as Manager/Whole time Director, Manager or in any other position in the company, the total remuneration paid to all of them all together as a percentage of profit as calculated for the purpose of section 198 of the Companies Act, 1956.
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