The draft rules to the Companies Act, 2013, have trimmed the list of relatives whose actions one is liable for, but India Inc is not amused with the new discretionary definition of relatives, either.

For instance, for the purpose of related-party transactions, the new companies law considers step-father and daughter?s husband as ?relative? but not brother?s wife, sister?s husband or daughter?s son. The Companies Act, 1956, of course, included all these in the relatives? list.

?The definition of ?relative? is very onerous and includes brothers/sisters on whom one may have no control. Such brothers/sisters could disqualify an auditor or an independent director by investing in shares of the company they work in,? said Dolphy D?Souza, senior partner, S R Batliboi & Co, which is a partner firm of EY.

In the new law, the definition of relative has excluded eight categories of relatives compared to the exhaustive list notified for Companies Act, 1956. These include son?s wife, son?s daughter?s husband, daughter?s son, daughter?s son?s wife and daughter?s daughter?s husband, among others.

As per the new Companies Act, 2013, ?related party?, with reference to a company, means a director or his relative; a key managerial personnel or his relative; a firm, in which a director, manager or his relative is a partner; a private company in which a director or manager is a member or director; a public company in which a director or manager is a director or holds along with his relatives, more than 2% of its paid-up share capital among others.

According to Lalit Kumar, partner in the law firm J Sagar Associates, the definition of ?relatives? has been shortened in the new Act compared to the Companies Act of 1956 ?because the earlier definition was very wide and included people who were far and remote?.

?Even after shortening, this list is still very wide,? Kumar said.

While the new law has done away with any government approval for a related-party transaction, it allows it only if approved by a special resolution at the annual general meeting of the company.