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Auditor's appointment

Gautam Dutta (Director) (33 Points)

19 February 2015

You have earlier replied our quastion. You have said that a relative of a Director can not be an Auditor of the Company.

Kindly let us know what is the definition of a relative as per companies act. And also let us know if any relative already is working as an Auditor of Company since incorporation then what can be done ?

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(Guest)

Relatives under Companies Act 2013

Meaning of Relative under the Companies Act, 2013

Before we get to know what ‘Relatives’ mean under the Companies Act, 2013 and the Persons who will be considered as Relatives. I would like to brief, for the sake of a Layman, that why do we need to know at the first place as to who are the Relatives under the Companies Act, 2013.

It is because of the reason that there are many references under the Companies Act, 2013 and other applicable acts relating to Indian Companies, wherein restrictions/limitation are put for relatives of any members/directors/key managerial persons/officers etc. of a Company, and therefore it is important to know all those persons who are covered under the definition of Relative.

Definition of ‘Relative’

Sub-Section (77) of Section 2 of the companies act 2013 defines "Relatives" as below:

"Relative" means, with reference to any person, means any one who is related to another, if—
(i) they are members of a Hindu Undivided Family;

(ii) they are husband and wife; or
(iii) one person is related to the other in such manner as may be prescribed;

Further, as per rule 4 of the Companies (Specification of definitions details) Rules, 2014, a person shall be deemed to be the relative of another, if he or she is related to another in the following manner, namely:-
(1) Father:
Provided that the term “Father” includes step-father.
(2) Mother:
Provided that the term “Mother” includes the step-mother.
(3) Son:
Provided that the term “Son” includes the step-son.
(4) Son’s wife.
(5) Daughter.
(6) Daughter’s husband.
(7) Brother:
Provided that the term “Brother” includes the step-brother;
(8) Sister:
Provided that the term “Sister” includes the step-sister.

P.S.: As compared to companies act 1956, the list of relatives is quite short now.

LIST OF RELATIVES as per companies act 1956 (no more applicable)

1. Father.

2. Mother (including step-mother).

3. Son (including step-son).

4. Son's wife.

5. Daughter (including step-daughter).

6. Father's father.

7. Father's mother.

8. Mother's mother.

9. Mother's father.

10. Son's son.