Meaning of Relative as per Companies Act 2013

Relative - Section 2(77) of the Companies Act, 2013 

Section 2(77) of the Companies Act, 2013 defines the word relative as below. “relative”, with reference to any person, means anyone who is related to another, if – they are members of a Hindu Undivided Family; they are husband and wife; or on person is related to the other in such manner as may be prescribed. Rule 4 of the Companies (Specification of definitions details) Rules, 2014 reads as follows List of relatives in terms of clause (77) of section 2.- A person shall be deemed to be the relative of another, if he or she is related to another in the following manner, namely:-

1. Father: Provided that the term “Father” includes step-father.

2. Mother: Provided that the term “Mother” includes step-mother.

3. Son: Provided that the term “Son” includes step-son.

 4. Son’s Wife.

 5. Daughter.

6. Daughter’s husband.

7. Brother: Provided that the term “Brother” includes step-brother.

8. Sister: Provided that the term “Sister” includes step-sister.

 The list given as above is very crystal clear. However, following needs to be understood. Father, mother, son, brother and sister include the step-counterparts but there is no specific mention about step-daughter. It may be a drafting mistake or may be an intentional exclusion. Whatever it may be, but the plain interpretation of the section indicates that step daughter is not a relative.

We get one more surprising thing here. In one case, a person can be relative of another in one way, but the reverse way, the person is not a relative. For example, Mr. A has a step daughter Ms. B. So for Ms. B, Mr. A, being a step-father, is a relative. However, for Mr. A, Ms. B is not a relative as step-daughter is not a relative. It is worth considering that son’s wife includes step son’s wife. However, daughter’s husband does not include step daughter’s husband. On division of a Hindu Undivided Family, the members of the family, except included in the above list of relatives, cease to be relatives.

Also, if we compare with Companies Act, 1956, the list of relatives is drastically cut short. The following snapshots will show the comparison of respective acts.

Unsecured loan from or to Private Ltd Company as per Companies Act 2013

Apart from Bank Finance, a private limited company depends on internal sources ( which are its shareholders, directors and relative of directors) for its investment and fund requirements.

Also, private companies, unlike public companies, are prohibited from accepting deposits from the public.

However, the new Companies Act, 2013 has brought a major change in the borrowing provisions and removed the shareholders and relative of directors from the list of eligible lenders but after amendment in Rule dated 15.09.015, some relaxation has been given to private companies i.e. now private company can accept monies from relatives of the director.

 Regarding Loans by Private Limited Company, in brief, 3 categories of loans have been prescribed under the Companies Act, 2013.

 Loans which can be accepted eg Loan from Directors, Loan from any other company, banking institutions etc.

Loans which can be accepted subject to complying with Deposit Rules, The Deposit Rules are very complicated, demand a lot of compliance and practically difficult to be followed. If these rules are followed, the company can take loan from shareholders etc.

Loans which cannot be accepted eg. Private Company cannot accept loans from any Partnership Firm, HUF etc

Below, the provisions of Act have been stated in a more structured manner.

Please be guided that the complex provisions of law have been simplified for easy understanding of stakeholders.

	Loans from	Conditions, if any:
1.)	Shareholder:	Member: Yes, can accept, but subject to the condition specified in deposit Rules2. Promoters & Their Relative: Yes, can accept if a.)  The condition specified in Deposit Rules2 is met or; b.)  If it is in stipulation of the requirement of any lending Financial Institution (FI) or Bank. This Exemption is available till the loan is not repaid.
2.)	Director/Relatives of Director	Yes, can accept, but the director will give a Declaration in writing that money is not given out of borrowed funds and company will disclose it in the Board’s report.
3.)	Employee	Yes, can accept  up to the employee’s annual salary ( there should be a contract of employment with the company) in the nature of non- interest  bearing security deposit.
4.)	Any other Individual	Can’t accept because it is prohibited by the definition of Private Company.
5.)	Proprietorship Firm ;	Can’t accept because it is prohibited by the definition of Private Company
6.)	HUF	Can’t accept because it is prohibited by the definition of Private Company
7.)	Partnership Firm	Can’t accept because it is prohibited by the definition of Private Company
8.)	Any Company	Yes, can accept, but also comply with Sec 1863 wherein the conditions are specified for the lender
9.)	Banks	Yes, can accept
10.)	Any other Financial Institution which are not incorporated as Banks ( eg. Religare, Fullerton, Barclays, Bajaj Finance)	Yes, can accept
11.)	Trust	Yes, can accept, but loan received should be non- interest bearing.
12.)	Outside India	Yes, can accept, but subject to the provisions of the Foreign Exchange Management Act, 1999 and rules and regulations made thereunder.
13.)	Govt.organisation ( eg. SIDBI)	Yes, can accept

Other points :

For accepting the Loans/Deposits from above parties, a company has to follow the conditions laid down under Sec 180(1)(c) which is 

If Proposed +Existing borrowings (exclude temporary borrowings) > (paid up capital +Free Reserves), the Company shall have to pass Special Resolution in General Meeting.

   2.  Deposit Rules: for acceptance of deposits from shareholders and relative of directors:

Company can accept maximum 25% of (paid up capital + Free reserves) – This limit is for existing and proposed deposits.

Company has to follow the procedure like issuance of circular, depositing insurance, credit rating, appointment of trustee etc.

But after Notification G.S.R. 464(E) dated 05/06/15, the company can accept 100% of (Paid up capital+ Free Reserves) without fulfilling the conditions mentioned in sec 73(2) clause (a) to (e) i.e. issuance of circular, depositing insurance, credit rating, appointment of trustee etc.

    3. Sec 186: A Company (Private or Public) can’t give loan to any other person or body corporate which is more than

                   60% of its Paid up Capital + Free Reserves + Security Premium

                                                Or

                   100% of Free Reserve + Security Premium

If this limit is exceeded, prior approval by special resolution in general meeting is required. However, in case a loan or guarantee is given by a company to its wholly owned subsidiary company or a joint venture company than special resolution is not required.

GOOD NEWS FOR DEPOSITORS FROM SBI

The State Bank of India (SBI) revises interest rates, raising them from as low as 15 basis points to 75 basis points, depending on the time period and amount of deposits. A few of the interest rates have even been kept constant such as the interest rate for deposit made for the time period ranging between 46 days and 179 days (for an amount less than Rs. one crore) keeping the rate unchanged at 6.25%.

Essentially, the term deposits (fixed deposits or FDs) of State Bank of India (SBI) can be divided into three broad categories: A) The deposit that are for less than Rs. one crore. B) The deposits that are over Rs. one crore but less than Rs. 10 crore. C) The deposits made for over Rs. 10 crore.

Category I: Deposit for lower than Rs. one crore

In the first category, the interest rate for the deposits made for one year has been hiked from 6.25% to 6.40%. The interest rate for the deposits made for ultra-short duration that is between seven days and 45 days, has been raised from 5.25% to 5.75%. At the same time, the deposits made for the long-term duration that is for over two years has been raised from 6% to 6.5%.

Tenors	Earlier	Revised	Earlier (senior citizens)	Revised (senior citizens)
7 days to 45 days	5.25	5.75	5.75	6.25
46 days to 179 days	6.25	6.25	6.75	6.75
180 days to 210 days	6.25	6.35	6.75	6.85
211 days to less than 1 year	6.25	6.40	6.75	6.90
1 year	6.25	6.40	6.75	6.90
Above 1 year to 455 days	6.25	6.40	6.75	6.90
456 days to less than 2 years	6.25	6.40	6.75	6.90
2 years to less than 3 years	6.00	6.50	6.50	7.00
3 years to less than 5 years	6.00	6.50	6.50	7.00
5 years and up to 10 years	6.00	6.50	6.50	7.00

 Category II: Deposits over Rs. one crore but less than Rs. 10 crore

In the second category, the rates of interest have been raised by upto 75 basis points. The minimum increase has been made against the deposits that are made for 5 years and above which has been raised from 6% to 6.25%. The deposits made for one year to 455 days has been raised from 6.25% to 6.75%. The deposits made for the ultra-short duration (seven days to 45 days) has been raised from 5.25% to 5.75%.

Category III: Deposits of over Rs. 10 crore

In the third category, the deposits made for Rs. 10 crore and above will earn an interest that will be higher by upto 75 basis points. The ultra-short duration deposits will earn the interest rate of 5.75% against 5.25% earlier. The moderately long duration interest rates (between 46 days to 210 days) will draw interest rate of 6.7% against 6.25% earlier. The deposits made for a time period that ranges between 211 days to less than two years will draw an interest rate of 6.75% against 6.25%. Similarly, the rate of interest on deposits made for two years to less than three years will be 6.75% against 6% earlier.

BUDGET 2018-2019 BRINGS MORE HAPPINESS FOR SENOR CITIZENS

The burden of a lifetime of extended working hours spent at the office is undertaken so that our families can reap the benefits of our hard work. The smiles on their faces is the reward we are given, which motivates us to continue providing for them.  However, as we age and the strain of 30 plus years of hard work is felt, any small relief sent our way is greatly appreciated.  The recently announced 2018 Budget held good news for senior citizens, providing the expected extra relief.

Amended Deductions for Senior Citizens

1.        During a person’s golden years, most of the income earned is in the form of the interest from the various savings established, such as post office schemes, FD’s etc.  Therefore, the increase in the exemption limit for interest income limit from Rs 10,000 to Rs 50, 000 is well received.

2.        The health insurance premium and/or medical expenditures deductible was also increased from Rs 30,000 to Rs 50,000 u/s 80D.  Additionally, the deductions available under section 80DDB for critical illnesses was increased to Rs 1, 00,000.  Both these deductions is available to all senior citizens, whereas before there was distinction in the allowance between senior citizens and super senior citizens (above 80yrs)

3.        The investment limit for Pradhan Mantri Vaya Vandana Yojana, which provides a return of 8%, by LIC of India (PMVVY) has been increased from Rs 7,50,000 to Rs 15,00,000.

Additionally, the various health schemes the government has introduced, also benefits senior citizens, as they are among the populace that it covers, such as:

·         Rashtriya Swasthya Bima Yojana (RSBY) – which at present provides an annual coverage of only Rs. 30,000, which is proposed to be increased to Rs 5,00,000

·         National Health Protection Scheme – This scheme provides coverage upto Rs 5,00.000 covers 10 crore poor families, which is approximately 50 crore recipients with primary and secondary care.

The improvements to the schemes/deductions available for senior citizens in the recently announced 2018 Budget, allows senior citizens to rest more peacefully in their golden years.

E-WAY BILL ON THE WAY ! #7TH MARCH, 2018

GST’s e-way bill system, which promises to enable faster movement of goods through a seamless portal-driven payment system, may see the light of the day from March 7, after technical glitches aborted its mandatory full-fledged launch on February 1.

While National Informatics Centre (NIC), the government’s nodal IT procurement arm, wants to implement a foolproof e-way bill system from April 1, the finance ministry is pushing for an earlier rollout in its effort to prevent revenue leakages.

On February 1, the portal collapsed as it wasn’t ready to handle the large volumes of inter as well as intra-state bills that were being generated at the time.

“The portal was capable to generating only 500 bills per minute, which was way too small a capacity as compared with the traffic on the day of launch. NIC has been asked to increase its capacity to at least a few thousands so that the system doesn’t collapse again,” the official said.

The Centre has now asked states to rollout intra-state bill in a staggered manner so that it does not put immense pressure on the portal as the government’s priority is smooth and steady implementation.

Besides, the prime rule of securing an e-way bill while ferrying goods worth more than Rs 50,000 within or outside a state through prior online registration of the consignment may be tweaked, for the time being, the official said.

To generate an e-way bill, the supplier and transporter will have to upload details on the GST Network portal, after which a unique e-way bill number (EBN) will be made available to the supplier, the recipient and the transporter on the common portal.

“The idea is to declutter the portal will less number of bills and reduce the load as much as possible,” the official added.

For instance, a single transporter may have five different consignments worth more than Rs 50,0000. Yet, that transporter had to generate five separate bills despite the value of a single consignment being less than half a lakh rupee.

The responsibility of developing an e-way bill system was given to NIC in September and it was decided by the GST Council on October 6 that the e-way bill should be made compulsory beginning April 1, 2018.

However, the Council met via video conference on December 16 and decided to make the rollout of all-India electronic-way bill compulsory from February 1--two months ahead of the earlier plan to mainly plug revenue leakages.

REMOVAL OF INDEPENDENT DIRECTORS TIGHTENED

Government tightens the norms regarding removal of Independent Directors reappointed under Companies Act 2013 

MCA has issued the Companies (Removal of Difficulties) Order, 2018 to provide the clarity on removal of re-appointed independent director in a company by way of special resolution.

Independent directors appointed for a second  term at corporates can now be removed only by a special resolution passed by shareholders, with the government tightening the rules. 

Before removal, such independent directors should also be given "reasonable opportunity of being heard", according to the corporate affairs ministry. 

The move comes against the backdrop of concerns in certain quarters about the independence of independent directors in carrying out their functions and instances of such people being removed from the boards of companies by promoter entities. 

A special resolution requires approval from at least 75 per cent shareholders present at a meeting whereas only a minimum of 50 per cent is needed in case of ordinary resolutions. 

Coming out with the new provision, the ministry said the decision is to ensure better corporate governance and balancing of powers of the boards. 

In this regard, the ministry has issued a 'Removal of Difficulties' order to introduce a new provision under Section 169 of the Companies Act. 

EPFO TO REDUCE EPF RATE TO 8.55%

Hello Everyone !

CBT is the highest decision-making body of the EPFO. It is chaired by the labour minister and has representatives of the Central and State governments, besides those from employers and employees.

The Central Board of Trustees of the Employees’ Provident Fund Organisation (EPFO) recommended slashing the interest rate for its 5-crore subscribers to a five-year low of 8.55 per cent for the current financial year of 2017-18 from 8.65 per cent last year.

 Labour and Employment Minister Santosh Gangwar said that at a rate of 8.55 per cent, the EPFO will have a surplus of Rs 586 crore.

Labour ministry sources also said the reduction in interest rate is in line with advice from the Finance ministry, indicating that the idea behind an interest rate cut this year is to build a good buffer to enable a hike in EPF interest rate next year. Two years ago, the Finance Ministry had proposed to reduce the interest rate on EPF from the earlier 8.8 per cent to 8.7 per cent for the fiscal 2015-16. However, even the minor reduction was opposed by the trade unions which had threatened an agitation forcing the government to retain the 8.8% rate of interest.

However for the subsequent year, the interest rate was reduced to 8.65 per cent in view of the falling interest rates in the economy and keeping the EPFO earnings in view. EPFO has nearly 6 crore subscribers. According to reports, after payment of 8.55 per cent interest for 2017-18, the organisation will be left with a surplus of Rs 586 crore against Rs 695 crore in the previous financial year.