Committee for increase in director's remuneration

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

26 July 2011 Dear All,

We are a closely held limited company (i.e. not listed) where 3 of our family members constitute the board of directors & hold a controlling share in the company as well. There are no external/non-executive directors.

We understand that a board resolution needs to be passed to increase directors remuneration.

Is it possible for the same directors to pass a resolution to increase their own remuneration? Or do we need to create a non-executive directors committee to be able to authorize the increase in our remuneration?

I ask this referring to section 300 of company act which says "interested director not to vote in board's proceedings". This might constitute a conflict of interest wherein a director is voting for his/her own increase in remuneration.

Would highly appreciate a speedy reply.

Thanks so much

Kaustubh

Ankit Patniya

Ankit Patniya (Expert)
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27 July 2011 In your case you can conduct board meeting and can pass three separate resolution for each director and pass resolution separately for each one excluding him form for the purpose of quorum and vote.
As the wording of sec 300 says "No director of a company shall, as a director, take any part in the discussion of, or vote on, any contract or agreement entered in to, or to be entered in to, by or on behalf of the company, if he is in any way whether directly or indirectly, concern or interested in the contract or agreement, nor shall his presence count for the purpose of forming a quorum at the time of any such discussion or vote......."

Querist : Anonymous

Querist : Anonymous (Querist)

28 July 2011 Dear Mr. Patadiya,

Appreciate your reply.

However the mention of being "indirectly" interested in the extract of sec 300 mentioned by you might suggest that increasing the remuneration of a family member director might be of "indirect interest" to the said director.

In that case would formation of such a committee be justified?

Hope you can assist.

Thanks Again

Kaustubh

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Ankit Patniya

Ankit Patniya (Expert)
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28 July 2011 Hi Kastubh

With respect to second message i have found that the matter in qoestion that is indirectr interest, The than DCA in 1963 has despatche the cicular Letter No.2/32/63-pr,dated 20-09-1963 please check it and than after the other one which is contranvention of this 1963's circuklar. the another is of DCA's circular Letter No. 8/46/(300)/64-pr, dated 27-1-1965. both have differnt intention so your query will require judicial back up i found other judgements that says that sec 300 not attaract in case like yours you should find it.
Thanks

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Querist : Anonymous

Querist : Anonymous (Querist)

28 July 2011 Dear Ankit,

Thanks so much for that.

This should work.

Will revert to you in case required.

Thanks Again

Kaustubh

Querist : Anonymous

Querist : Anonymous (Querist)

03 August 2011 Dear Ankit,

I have received a counter argument against the first circular mentioned by you.

"Provisions of section 300(l) do not apply to Board resolution fixing or increasing Director's fees"

I am advised that "fees" relates to "board meeting fees" & not "director remuneration".

Hence i would still need to constitue a committee of non-independent directors for increasing director remuneration.

Also, if you have the files/links to any judgements supporting my case, kindly share them with me.

Thanks so much

Kaustubh

Querist : Anonymous

Querist : Anonymous (Querist)

03 August 2011 Dear Ankit,

In fact I would also appreciate if you could attach circular Letter No.2/32/63-pr,dated 20-09-1963.

Thanks

Kaustubh

Ankit Patniya

Ankit Patniya (Expert)
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04 August 2011 Hello Kaustubh,

I need your e mail id for sending attachement please send me text mail on my mail id ankitpatadiya@hotmail.com for sendng pdf file.
Thanks

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