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IS THERE any special regulation for appointment as an employee of a relative of a person controlling majority of the shares in a company?

Anand Kumar, Bangalore

Curiously, the law places no restraints on appointment of relatives of a majority shareholder. But there are restrictions if a relative of director is sought to be appointed to an office of profit in a company. Parliament presumably thought that a dominant shareholder would invariably be a director as well and, therefore, in its wisdom it has chosen to target directors alone without specifically targeting dominant shareholders. Be that as it may, prior consent of the Central Government and a special resolution would be necessary for appointing a relative of a director to an office carrying a monthly remuneration of Rs 50,000 or more. This equally applies to a private company.

GDRs, ADRs

WHAT are the tax implications are GDRs/ADRs issued by an Indian company?

Kushi Mishra, e-mail

Dividend is tax-free in common with the exemption given to the shareholders. Capital gains is also exempt from tax if the transferee, too, is a non-resident and the transfer is outside India. If these conditions are not met, the long-term capital gain from such transfer would be taxable at 10 per cent. The short-term capital gains, however, would be taxable at normal rates in case these conditions are not met. The reason why such long-term capital gains is not exempt from tax in terms of the newly introduced exemption and such short-term gains is not eligible for a soft 10 per cent tax is that the transaction did not take place in a recognised stock exchange in India and was not subjected to securities transactions tax.

(ASK! Send in your queries on accounting, auditing, corporate law and taxation to ask@thehindu.co.in)

S. Murlidharan

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