company law

Amendments to Director's Relatives Rules: Key Changes and Implications

Amendment Notification for Director’s Relatives (Office or Place of Profit) Rules

Introduction

This blog discusses the notification issued by the Central Government regarding amendments to the Director's Relatives (Office or Place of Profit) Rules, 2003, effective as of April 6, 2011.

Key Amendments to the Rules

The amendments made to the Director's Relatives (Office or Place of Profit) Rules, 2003, are as follows:

  1. Title of the Amendment:

    • These amendments may be referred to as the Director’s Relatives (Office or Place of Profit) Amendment Rules, 2011.

  2. Effective Date:

    • The rules shall come into force immediately upon publication in the Official Gazette.

  3. Revised Monetary Threshold:

    • Within the said rules, rule 3 has been updated. The previously established figure of “50,000” has been increased to “2,50,000”.

  4. Changes in Selection and Appointment Procedures:

    • The prior stipulations in rule 7 have been revised. Now, the selection and appointment for a relative of a director in a position of office or profit must be approved using the same processes applied to non-relatives.

    • Additional Provisions for Listed Public Companies:

      • For listed companies, the selection of a director to hold an office or profit position must receive approval from a Selection Committee.

    • Definition of Selection Committee:

      • The term “Selection Committee” refers to a group that must predominantly consist of independent directors, alongside an external expert from the relevant field.

    • Provisions for Unlisted and Private Companies:

      • In unlisted companies, while independent directors are not mandatory, the presence of external experts in the Selection Committee remains required.
      • For private companies, there is no requirement for independent directors or external experts.

Conclusion

These amendments aim to update the regulations concerning the appointment of directors’ relatives, ensuring a more structured and compliant selection process. It reinforces the importance of independent oversight and expertise, especially within listed entities, while providing flexibility for unlisted and private companies.