Continued .................... Part 1 The analysis of Section 2(76) i.e., Related Party - Clause (ii) of the said section includes Key Managerial Person or his relative. Now KMP includes Managing Director, whole time Director, Manager, Company secretary and to new offices christened as Chief Financial Officer and Chief Executive Officer. Definitions of Managing director, Whole time director and manager are cut and paste from the previous Act and two words Chief Financial Officer and Chief Executive Officer have been defined as persons appointed as such in sub sections 18 and 19 of the section 2. Now apart from Dr. Irani Committee having extra ordinary draftsmen associated for drafting the new Act. All three premiere institutes ICSI, ICAI, ICWAI along with IIMs, MCA and honorable 542 MPs having celebrated lawyers from Supreme Court were involved in drafting and enacting this law. However, none of them could define the words Chief Financial Officer and Chief Executive Officer. If you don’t have the capacity to define two simple words then why you introduced those two innocuous words in the Act. The word KMP also includes a poor useless person called Company Secretary. This denounced post in Companies Act, 1956 was a statutory person recognized and fortified as such by an independent Section 383A in the erstwhile Act. As a statutory person he acted as an interface of the company dealing with shareholders, directors, creditors, employees, people at large, regulators and government ensuring and assuring compliance with laws in public interest. This post is gone in the new Act. Now Company Secretary are neither finding jobs in the industry nor are they sincerely recognized in the Companies Act, 2013 to establish an independent practice for themselves. But see the nonsense in the Act, if he by mistake holds the position of Company Secretary in a company and where he will be going everyday with a morbid fear of losing his job but his relatives cannot do the business with the company for his holding of such an idiotic position. Now, the question is whether the doctrine of fiduciary duties extended to company secretaries and chief finance officers, too? If the answer to the same is yes then the legislatures should have clarified on what basis. Clause 4 says a private company in which a director or manager is member or director; that means if a relative of director, manager is a director or member in that private limited company or a virtual owner of private company he will not be a related party. Clause 5 prescribes a public company in which a director or manager is a director or holds with his relatives more than 2 % of its paid up share capital; however if more than one Director of the Company holds more than 2% in the other company then it will not be read as a related Party as per definition. It is needless to state that schedule 1A relating to relatives has also been diluted substantially by the New Act. I have already posted my views on the same.
Posted on: Fri, 22 Aug 2014 13:00:28 +0000
Trending Topics
Recently Viewed Topics
© 2015