Promoter explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
No. And unlike most tests in Section 149(6), this one has no threshold to argue about. You're related or you aren't.
It's worth knowing exactly how far the bar reaches, because the reverse question — whether a relative who isn't a promoter can be one — has a more interesting answer.
Section 149(6)(b) blocks anyone related to the promoters or directors of the company, its holding, subsidiary or associate company. "Relative" is defined in the Act and covers spouse, parents, children and their spouses, siblings, and HUF members. There's no materiality threshold. Separately, being a promoter yourself is a permanent bar — "is or was not." And for listed entities, SEBI excludes anyone in the promoter group, which is wider still.
The promoter bar is permanent
Section 149(6)(b)(i) provides that an independent director must be a person "who is or was not a promoter" of the company or its holding, subsidiary or associate company.
Read the tense. "Is or was not." There is no look-back period and no cooling-off. Someone who promoted the company twenty years ago and sold out entirely is permanently ineligible to be its independent director.
The relative bar
Section 149(6)(b)(ii) blocks a person related to the promoters or directors in the company, its holding, subsidiary or associate company.
"Relative" under Section 2(77) and the rules covers:
| Category |
|---|
| Members of a Hindu Undivided Family |
| Spouse |
| Father, including step-father |
| Mother, including step-mother |
| Son, including step-son |
| Son's wife |
| Daughter |
| Daughter's husband |
| Brother, including step-brother |
| Sister, including step-sister |
Note what's not in the list: cousins, uncles and aunts, nephews and nieces, in-laws beyond son's wife and daughter's husband, and — significantly — a brother's wife or a wife's brother.
That's a narrower definition than most people assume. A promoter's brother-in-law is not a "relative" for this purpose.
But don't stop there. Someone outside the "relative" definition can still fail on other tests: the pecuniary relationship test, the relatives' financial limits, the employment look-back, or — for a listed entity — the promoter group exclusion. And Section 149(6)(a) requires the board to form an opinion on integrity and suitability, which a board should not be forming lightly about someone with a visible family connection to the promoter.
The honest position: a family connection that falls outside the technical definition may be legally survivable and still indefensible in substance. If you'd struggle to explain the appointment to an institutional investor, that's your answer.
The four financial limits on relatives
Even where a relative isn't a promoter or director, Section 149(6)(d) applies four caps, tested over the current and two preceding financial years:
| What the relative holds or has | Limit |
|---|---|
| Securities or interest in the company, its holding, subsidiary or associate | ₹50 lakh face value or 2% of paid-up capital, whichever is lower |
| Indebtedness to the group | ₹50 lakh |
| Guarantee or security given for a third party's debt to the group | ₹50 lakh |
| Any other pecuniary transaction with the group | Below 2% of gross turnover or total income, singly or combined with the above |
The fourth row aggregates the others, so three individually small relationships can breach it together.
And Section 149(6)(e) extends the three-year employment look-back to relatives: neither you nor your relatives can have been a KMP or employee of the group, or an employee, proprietor or partner of its auditors, secretarial auditors, cost auditors, or of a legal or consulting firm doing 10% or more of its business with the group.
There's one relief inside that: where the relative is an employee, the restriction doesn't apply to that employment during the preceding three financial years.
SEBI goes further
For a listed entity, Regulation 16(1)(b) excludes anyone who is a member of the promoter group — a wider concept than "promoter" or "related to a promoter", defined in SEBI's issue regulations and capturing a broader circle of family members and connected entities.
So a person who clears the Companies Act relative test may still be inside the promoter group, and therefore ineligible for a listed board.
Key takeaways
- A promoter's relative cannot be an independent director. No threshold, no exception.
- Being a promoter is a permanent bar — "is or was not."
- The definition of "relative" is narrower than people assume — no cousins, uncles, or brothers-in-law.
- Clearing the technical test isn't the same as being independent. The board still has to form an opinion.
- Relatives who aren't promoters face four financial limits and the three-year employment look-back.
- Listed entities exclude the whole promoter group, which is wider.
Read next
- Independent Director Eligibility: Who Qualifies Under Section 149(6)
- Declaration of Independence: Section 149(7) and Regulation 25(8)
- Independent vs Non-Executive vs Nominee Director
- Can an Independent Director Hold Shares or Get ESOPs?
Law stated as on 5 September 2026.
Key Facts About Promoter
- Applies in: All states across India, under the relevant central law.
- Mode: Mostly online via the official government portal.
- Typical timeline: Ranges from a few days to a few weeks depending on the case.
- Non-compliance: May attract penalties, interest or late fees.
- Expert help: TaxClue completes the entire process end to end for you.
Can a promoter's brother-in-law be an independent director?
A brother's wife or wife's brother isn't a "relative" under the Act's definition, so the relative bar doesn't catch them. They must still clear every other test — and for a listed company, the promoter group exclusion.
Is a cousin a relative for this purpose?
No. Cousins aren't in the statutory list.
Over 90% of compliance penalties in India arise from missed due dates — timely handling can save businesses thousands of rupees each year.
Promoter: a key compliance topic in Indian tax and corporate law that businesses and individuals must understand to remain compliant.