The Ministry of Corporate Affairs issued Companies (Removal of Difficulties) Sixth Order, 2014 dated 24.07.2014 in order to provide clarification with respect to the “related party” as the difficulties have arisen due to he absence of the word ‘relative’ in the sub-clause (iv) in the said definition although such word has occurred in sub-clauses (i), (ii), (iii) and (v) of the aforesaid clause (76) which has resulted in the disharmonious interpretation of the said clause.
so, in order to remove the ambiguity in the said clause the word ‘or his relative’ shall be inserted after the word Manager in clause (iv) in the definition.
The Amended definition by the virtue of the order is contained herein below which says:
‘Related Party’ with reference to a company means:
(i) a director or his relative;
(ii) a key managerial personnel or his relative;
(iii) a firm, in which a director, manager or his relative is a partner;
(iv) a private company in which a director or manager or his relative is a member or director;( amended by the virtue of Companies (Removal of Difficulties) Sixth Order, 2014)
(v) a public company in which a director or manager is a director and holds along with its relatives more than two percent of its paid-up share capital; (amended by the virtue of Companies (Removal of Difficulties) Fifth Order, 2014)
(vi) any body corporate whose Board of Directors, Managing director or manager is accustomed to act in accordance with the
(vii) any person on whose advice, directions or instructions a director or manager is accustomed to act:
Provided that nothing shall apply in sub-clauses (vi) and (vii) to the advice, directions or instructions given in professional capacity;
(viii) any company which is-
(a) a holding, subsidiary or an associate company of such company; or
(b) a subsidiary of a holding company to which it is also a subsidiary;
(ix) such other person as may be prescribed by the Board
The Companies (Removal of Difficulties) Sixth Order, 2014 can also be accessed at the link given below:
Companies (Removal of Difficulties) Sixth Order, 2014
