07 November 2013
MD's brother-in-law is employed as HR Manager in the Company from Sep 2011. His remuneration has been revised to Rs 62,000 from Rs 49,000 in April 2013. MD is drawing a remuneration of Re 1 per month from the company. MD is in the rolls of some other company. Kindly advise on the applicability of Section 314 of companies act.
11 November 2013
Increase in the remuneration of a person appointed in the Office or Place of Profit:
If the remuneration of a person appointed in the office or place of profit needs to be increased than the approval of the members of the company by passing special resolution in the general meeting is to be taken, for each time the remuneration is so increased. However, if the appointment is made under time scale in the first instance, there will be no need for further approval of members. Relative of director or firm in which such relative is a partner, appointed to office or place of profit before a person hold the office of director in a company. As per section 314(1A) if a relative of a director or firm in which such relative is partner is appointed to office or place of profit in a company before the appointment of such person as a director in the company, it will not effect the continuance of the holding of an office or place of profit by a relative of such director or by a firm in which such a relative is a partner.
11 November 2013
NEW RULES ON DIRECTOR’S RELATIVE (OFFICE OR PLACE OF PROFIT) RULES, 2011 The MCA has issued a Notification No. G.S.R. 357(E) dated 02.05.2011: In exercise of the power conferred by clause (b) of sub-section (1) of Section 642, read with sub-section (1B) of section 314 of the Companies Act, 1956, the Central Government hereby makes the following Rules in supersession of the earlier Notification No. 89(E) dates 05.02.2003,namely:- 1. Short Title and Commencement: (1) These rules may be called Director’s Relative (Office or Place of Profit) Rules, 2011. (2) They shall come into force on the sate of their publication in the official gazette. 2. Applicability: These rules shall apply to all companies registered under the Companies Act, 1956 except as provided in these rules. 3. Approval of the Central Government in case of Appointment of Relatives, etc. of Directors: No appointment for an office, or place of profit in a company shall take effect unless approved by the Central Government on an application, in respect of :- (a) Partner of firm or relative of a Director or Manager, or (b) Firm in which such Director, or Manager or relative of either is a partner; or (c) Private company of which such Director, or Member or relative of either is a Director or member, which carries a monthly remuneration exceeding, Rs. 2,50,000 p.m. (c ) An individual who is a relative of a director, or Manager and is appointed as an Advisor or Consultant and paid remuneration including commission on periodical basis. 4. Selection of Relatives of Directors and Directors and Directors to Hold a Place of Office/Profit:- (a) The selection and appointment of a relative of a Director for holding office or place of profit in the company with the salary exceeding Rs. 250000 p.m. shall be approved by adopting the same procedure applicable to non-relatives and approved by Selection Committee. Explanation: For the purpose of the sub-rule, in the case of listed public companies, the expression “Selection Committee” means a committee, consisting of at least three members, the majority of which shall be independent director and an outside expert. Provided that in case of unlisted companies, Independent director are not necessary but outside expert should be their in the Selection Committee. Provided further that in the case of private companies, Selection Committee is not necessary. 5. Procedure for Examination of Application: The application under rule 3 shall be examined with respect to the following, in addition to all other requirements under the Companies Act, 1956, 1956:- (a) In the case of Individual appointee, an undertaking from him that he/she will be in exclusive employment of the company and will not hold a place of profit in any other company. (b) The monitory value of all allowances and perquisites and of total remuneration package (monthly/annually) proposed to be paid to the appointee and details of the services that will be rendered by him to the company. (c) Details of shareholding pattern particularly the shareholding of the directors along with his/her/their relatives, the public holding, the institutional holding (each institution separately) and the quantum of dividend paid by the company during the last three preceding financial years. (d) Details of educational qualification/experience, pay scale, allowances and other benefits of similarly placed executives. (e) In case of the appointment of a relative, an undertaking from the Director/Secretary of the Company that the similarly placed employees are getting the comparable salary. (f) List and particulars of the employees who are in receipt of remuneration of Rs. 250000 or more per month. (g) The total number of relatives of all the Directors either appointed as Manager/Whole time Director, Manager or in any other position in the company, the total remuneration paid to all of them all together as a percentage of profit as calculated for the purpose of section 198 of the Companies Act, 1956.
CAclubindia
