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May 2011

Director’s Relatives (Office or Place of Profit) Amendment Rules, 2011.

By Sejal Vasa | Company Secretary
Reading Time 2 mins
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The Companies Act, 1956 requires a company to obtain the Central Government’s approval for appointing a director’s relative to an office or place of profit, if the monthly remuneration for such office or place of profit exceeds the prescribed limit. This limit has now been raised from Rs.50,000 per month to Rs.2,50,000 per month.

The notification has also amended Rule 7 of Director’s Relative (Office or Place of Profit) Rules, 2011 and redefined the constitution of Selection Committee for the purpose of appointment of a director to the office or place of profit. Under the amended Rule the Selection Committee shall comprise of:

(1) For listed public companies — independent directors shall constitute the majority and committee ought to have an expert in the respective field from outside the company.

(2) For unlisted public companies — independent directors are not necessary but an expert from outside the company should be part of the committee.

(3) For private limited companies — independent directors and outside experts are not required to be part of the committee.

Thus, even a private company is required to constitute a Selection Committee for appointment of director to an office or place of profit.

For complete text of the Notification visit:

http://www.mca.gov.in/Ministry/notification/pdf/ Notification2_31mar2011.pdf

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