Related party - Pvt Ltd Company in which Director or relative is a member or Director

Pvt ltd 468 views 3 replies

V R Ganesan

Proprietor

3 Points Posted on 05 August 2022

As per COA 2013 a private company in which a director or manager or his relative is a member or director is considered as a related party.If they are a director, the case is clear. For public companies, the limit is 2% of shareholding.

But what is the limit in shareholding to be considered as a member of the private company? Whether owning a single share of small number of shares qualifies as being member, thus making said company a related party of the first company?

Replies (3)

CA Sorav Gupta

Chartered Accountant

1005 Points Posted on 05 August 2022

As per the query raised by you, it seems that you are asking if a person is a member of two companies. whether the companies will be considered as the related party. Kindly note that if the person is not a director or manager or relative of such person, then it will not be covered u/s 2(76) of the Companies Act, 2013.

Ex- I am holding 1 share of TCS & Reliance each, it doesn't mean that both the companies will become related to each other provided I am not a managerial person in these companies.

Ex 2: If I am a director of TCS Limited & holding 1 share of M/s ABC private limited, then both the parties become a related party as per sub-clause (iv) of Section 2(76).

In case of any further queries, kindly mail me at casoravgupta @ gmail.com

Thanks & Regards
ACA. Sorav Gupta
(Practicing Chartered Accountant)

V R Ganesan

Proprietor

3 Points Posted on 05 August 2022

So if a director/manager of a company or their relative in A Pvt Ltd holds even a single share in any private limited company, say B Ltd., then B Pvt Ltd becomes a related party to A Pvt Ltd right? This would mean that the scope of related party becomes vast in case a director/relative holds shares in several other private companies in which they are NOT directors.