Related party transaction

Is independent director treated as a related party under companies act? If yes, is the payment of sitting fee to such a director considered as a related party transaction?
Replies (4)

Yes, Independent director is also considered as related party. Independent Directors are entitled only to payment of sitting fees for attending board/committee meetings and reimbursement of expenses for attending board/committee meetings. Payment of sitting fees to such a director is not considered as related party transaction. 

 

Is it specifically provided anywhere in Companies act that payment of sitting fees to independent directors i
sir, is it specifically provided in Companies act that payment of sitting fee to independent director is not a related party transaction?

Section 149(9) of the Companies Act, 2013 says that an ID shall not be entitled to any stock option, but may receive remuneration by way of fee provided under Section 197(5) ie sitting fees for attending board/committee meetings, reimbursement of expenses for participation in board and other meetings and profit related commission as may be approved by members.

Also, payment of sitting fees to ID doesn't fall in the category of RPT items mentioned in Section 188(1). Therefore, it can be concluded that payment of sitting fees to ID is not considered as RPT.

Hope, the provision is clear to you.

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