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Query in company act,2013

PRIYARANJAN SUTAR (Student CA FINAL) (41 Points)

11 June 2017

what is pecuinary interest as per companies act 2013.please sir anyone eleborate in briefly in point wise...please sir it is necessary.as i m a ca final student.

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Sanjay S (Chartered Accountant) (1375 Points)
Replied 11 June 2017

A "pecuniary interest" is an interest that a person has in a matter because of a reasonable likelihood or expectation of appreciable financial gain or loss to the person or another person with whom the person is associated.

Usually the restrictions on Pecuiniary Interests have been placed on Independant Directors (ID)

Section 149(6)(c): Clarification Relating to “pecuniary interest in certain transactions” :-

Notified Date of Clarification : 09/06/2014

(a) This provision inter alia requires that an ‘ID’ should have no ‘pecuniary relationship’ with the company concerned or its holding/ subsidiary/ associate company and certain other categories specified therein during the current and last 2 preceding financial years.

Clarifications have been sought whether a transaction entered into by an ‘ID’ with the company concerned at par with any member of the general public and at the same price as is payable/ paid by such member of public would attract the bar of ‘pecuniary relationship’ under section 149(6)(c).The matter has been examined and It is hereby clarified that in view of the provisions of section 188 which take away transactions in the ordinary course of business at arm’s length price from the purview of related party transactions, an ‘ID’ will not be said to have ‘pecuniary relationship’ under section 149(6)(c) in such cases.

(b) Stakeholders have also Sought Clarification whether receipt of remuneration, (in accordance with the provisions of the Act) by an 'ID’ from a company would be considered as having pecuniary interest while considering his appointment in the holding company, subsidiary company or associate company of such company.

The matter has been examined in consultation With SEBI and It is clarified that ‘pecuniary relationship’ provided in section 149(6)(c) of the Act does not include receipt of remuneration, from one or more companies, by way of fee provided under sub-section (5) of section 197, reimbursement of expenses for participation in the Board and other meetings and profit related commission approved by the members, in accordance with the provisions of the Act.

It is evident from provisions of CA 2013 that much emphasis has been placed on ensuring greater independence of independent directors. The overall intent behind these provisions is to ensure that an independent director has no pecuniary (ie., monetary or financial) relationship with, nor is he provided any incentives (other than the sitting fee for board meetings) by it in any manner, which may compromise his / her independence.

Note : "ID" Means (Independent Directors)