Query on managerial remuneration u/s 197 of CA 2013

This query is : Resolved

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This discussion clarifies the applicability of Section 197 of the Companies Act 2013 regarding managerial remuneration to private limited companies in India. While Section 197 generally doesn't apply to private limited companies, a query arose concerning wholly-owned subsidiaries of foreign parent companies. The consensus is that an Indian private limited company remains subject to its classification under Indian law, irrespective of its foreign ownership. Section 2(71) of the Act, which can deem a private company a public company if its subsidiary is public, applies only to companies incorporated under Indian law, not foreign entities.

abhijit majumder

abhijit majumder (Querist)
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06 November 2025 Sir
Section 197 of CA 2013 prima facie not applicable to Pvt Ltd Company.
My query is :
A Pvt ltd Company incorporated in India & wholly owned subsidiary of a Foreign Company(a big Company) does Section 197 applicable to that Pvt Ltd subsidiary Company ?
Regards
Abhijit

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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06 November 2025 No. - Being a subsidiary of a foreign company does not change its classification under Indian law. If it remains a private limited company, Section 197 does not apply.

Even if the foreign parent is a listed entity abroad or a large multinational, the Indian subsidiary’s compliance is governed by its own legal status under Indian law.

abhijit majumder

abhijit majumder (Querist)
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07 November 2025 Thanks to Sir Dhirajlal Rambhia for sharing his view.
But Sir need a clarification that section 2(71) of CA 2013 inter alia states that pvt Co subsidiary of a Public Co shall also consider as Public Co..
In that case does a Foreign Company not incorporated under CA 2013 the provision of Sec 2(71) not apply to that Foreign Company irrespective that it may be a public/listed company?
Your kind view is expected.
Regards
Abhijit

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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07 November 2025 If a foreign public company sets up a private limited subsidiary in India, then that Indian subsidiary may be deemed a public company under Section 2(71) if the foreign parent qualifies as a public company under Indian standards (e.g., not a private company as per Indian law). This is a nuanced area and often hinges on control, shareholding patterns, and the nature of the foreign parent.
- Section 2(71) defines a “public company” only in the context of companies incorporated under the Companies Act, 2013 (or any previous Indian company law). It does not apply to foreign companies.

abhijit majumder

abhijit majumder (Querist)
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07 November 2025 My sincere thanks to Sir Dhirajlal Rambhia to clarify my doubt.
Regards
Abhijit

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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07 November 2025 You are welcome,

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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09 November 2025 Good luck...

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