Payment to relative of director

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

30 March 2012 Mr. A is a director of a Private Limited Company. The Company is making payment to Mrs. A on professional capacity for rendering Engineering services. Is it necessary to obtain the approval of Board for making payment to Mrs. A. If so, please provide the format of Board Resolution.

Thanks in advance

Ajay Mishra

Ajay Mishra (Expert)
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30 March 2012 Hi

The provisions or remuneration to directors or managers will not apply to private limited company so you are free to pay any remuneration.

CS, Deepak Pratap Singh

CS, Deepak Pratap Singh (Expert)
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30 March 2012 Dear Friend, The provisions of Directors remuneration in a private company is governed by its Articles of Association and provisions of companies act is not applicable. Now since the relative is working in a professional capacity then you may provide her remuneration and same will not be covered U/s. 314 of the Companies Act, 1956 thanks

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Querist : Anonymous

Querist : Anonymous (Querist)

31 March 2012 Thanks for the reply sirs.

I agree with both of you. But my question is as payment of remuneration to relative of director for rendering services in his professional capacity is not covered U/s 314, is it necessary to pass Board resolution for the same.

Ajay Mishra

Ajay Mishra (Expert)
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31 March 2012 Hi

If you are paying any money in addition to director remuneration to director then it will fall under section 314 which will apply on both public as well as private.

In your case you are paying him remuneration in his profession capability and not for director then you will comply the provision of section 314 of the Companies Act.

Regards