Section 314 of companies act 1956
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
06 July 2013
can anybody provide me information regarding remuneration at which level central government approval required. and suggest me applicable form for that.
08 July 2013
Hi
As per section 314 certain persons cannot be appointed or allow to hold an office or place of profit in the company unless, they comply with the requirement of the provisions of this section. If any person is proposed to hold such office or place of profit in the company then company has to take consent of the shareholders by passing special resolution in the general meeting of the company.
No such consent is required, if a director receiving remuneration by holding such office or place in subsidiary of the company returned such remuneration to the subsidiary or its holding company.
As per section 314 certain persons cannot be appointed or allow to hold an office or place of profit in the company unless, they comply with the requirement of the provisions of this section. If any person is proposed to hold such office or place of profit in the company then company has to take consent of the shareholders by passing special resolution in the general meeting of the company.
No such consent is required, if a director receiving remuneration by holding such office or place in subsidiary of the company returned such remuneration to the subsidiary or its holding company.
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08 July 2013
Circumstances under which a special resolution is required to be passed:
As per section 314(1) certain persons as given below cannot hold office or place of profit carrying the remuneration of Rs. 10,000 p.m. or more in the company, unless a special resolution to that effect has been passed in the general meeting of the company:—
1. Any partner of the firm in which director of the company is also a partner;
2. Any relative of a director of the company;
3. Any firm in which a director or his relatives or both are partner;
4. Any private company in which director of the company is holding office of director or member;
5. Any director/manager of a private company in which director of the company is holding office of director or member.
For computing the limit of Rs. 10,000 per month, bonus, leave encashment, reimbursement of medical expenses, etc., which are not events of monthly regularity or occurrence cannot be taken into account.
Where relative of any director or any of the person mentioned above is or appointed to an office or place of profit without the knowledge of director of the company, such appointment shall require the approval of the members in the general meeting by way of special resolution within 3 months of the date of appointment.
As per section 314(1) certain persons as given below cannot hold office or place of profit carrying the remuneration of Rs. 10,000 p.m. or more in the company, unless a special resolution to that effect has been passed in the general meeting of the company:—
1. Any partner of the firm in which director of the company is also a partner;
2. Any relative of a director of the company;
3. Any firm in which a director or his relatives or both are partner;
4. Any private company in which director of the company is holding office of director or member;
5. Any director/manager of a private company in which director of the company is holding office of director or member.
For computing the limit of Rs. 10,000 per month, bonus, leave encashment, reimbursement of medical expenses, etc., which are not events of monthly regularity or occurrence cannot be taken into account.
Where relative of any director or any of the person mentioned above is or appointed to an office or place of profit without the knowledge of director of the company, such appointment shall require the approval of the members in the general meeting by way of special resolution within 3 months of the date of appointment.
08 July 2013
Circumstances under which section 314(1B) is applicable and consent of Central Government is required:
As per section 314(1B) certain persons as given below cannot hold office or place of profit carrying the remuneration of Rs. 2,50,000 p.m. or more in the company, unless special resolution to that effect has been passed in the general meeting of the company and prior approval of the Central Government has been obtained:—
1. any partner of the firm in which director of the company is also a partner;
2. any relative of a director of the company;
3. any firm in which a director or his relative or both are partner;
4. any private company in which director of the company is holding office of director or member;
5. any director/manager of a private company in which director of the company is holding office of director or member.
Provision of section 314(1B) shall not apply to any appointment of firm of solicitors/advocates, if they are appointed to give advise and are consulted by the company in its work on case to case basis. Therefore, any remuneration or fee received by a professional director as advocates/solicitors for appearing in a Court of Law or Company Law Board/Tribunal in pleading on behalf of the company will not come under the provisions of the section as mentioned above.
Circumstances under which section 314(1B) is applicable and consent of Central Government is required:
As per section 314(1B) certain persons as given below cannot hold office or place of profit carrying the remuneration of Rs. 2,50,000 p.m. or more in the company, unless special resolution to that effect has been passed in the general meeting of the company and prior approval of the Central Government has been obtained:—
1. any partner of the firm in which director of the company is also a partner;
2. any relative of a director of the company;
3. any firm in which a director or his relative or both are partner;
4. any private company in which director of the company is holding office of director or member;
5. any director/manager of a private company in which director of the company is holding office of director or member.
Provision of section 314(1B) shall not apply to any appointment of firm of solicitors/advocates, if they are appointed to give advise and are consulted by the company in its work on case to case basis. Therefore, any remuneration or fee received by a professional director as advocates/solicitors for appearing in a Court of Law or Company Law Board/Tribunal in pleading on behalf of the company will not come under the provisions of the section as mentioned above.
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08 July 2013
Procedure to be followed for appointment of a person on office or place of profit, requiring approval of the Central Government:
If a company appoint a director or concerned persons on office or place of profit on a total monthly remuneration of Rs. 2,50,000 or more, it has to obtain consent of the members of the company by way of special resolution in the general meeting and with the prior approval of the Central Government for the first time after the holding of such office. The following procedure has to be complied with:—
1. Hold a Board meeting, considering appointment under section 314 and approve notice for convening general meeting for passing special resolution by the members. Explanatory statement furnishing full particulars thereof has to be sent to the members with the notice of the meeting;
2. Obtain approval of selection committee for appointment of relative to office or place of profit before getting approval of members in general meeting;
3. Hold a general meeting and pass a special resolution for getting approval to the appointment under section 314(1) or (1B);
4. Particulars of such appointment shall be filed electronically with the Registrar of Companies in the e-Form 23 alongwith the copy of such resolution and prescribed fees within thirty days of the passing of special resolution;
5. Prepare and file an application electronically to the Central Government for its approval in the e-Form 24B alongwith prescribed fee;
6. The Central Government may vary the terms and conditions of appointment while according its approval. On obtaining approval from the Central Government, the Company should enter into a contract with the concerned person.
Procedure to be followed for appointment of a person on office or place of profit, requiring approval of the Central Government:
If a company appoint a director or concerned persons on office or place of profit on a total monthly remuneration of Rs. 2,50,000 or more, it has to obtain consent of the members of the company by way of special resolution in the general meeting and with the prior approval of the Central Government for the first time after the holding of such office. The following procedure has to be complied with:—
1. Hold a Board meeting, considering appointment under section 314 and approve notice for convening general meeting for passing special resolution by the members. Explanatory statement furnishing full particulars thereof has to be sent to the members with the notice of the meeting;
2. Obtain approval of selection committee for appointment of relative to office or place of profit before getting approval of members in general meeting;
3. Hold a general meeting and pass a special resolution for getting approval to the appointment under section 314(1) or (1B);
4. Particulars of such appointment shall be filed electronically with the Registrar of Companies in the e-Form 23 alongwith the copy of such resolution and prescribed fees within thirty days of the passing of special resolution;
5. Prepare and file an application electronically to the Central Government for its approval in the e-Form 24B alongwith prescribed fee;
6. The Central Government may vary the terms and conditions of appointment while according its approval. On obtaining approval from the Central Government, the Company should enter into a contract with the concerned person.
08 July 2013
Documents and particulars to be furnished in the application to the Central Government
The following information shall be given in the application:—
(i) An undertaking from the appointee that he/she will be in the exclusive employment of the company and will not hold a place of profit in any other company.
(ii) The monetary 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.
(iii) Shareholding pattern particularly the shareholding of the directors along with his/her/their relatives, the public holding, institutional holding (each institution separately).
(iv) The educational qualification/experience, pay scale, allowances and other benefits of similarly placed executives. In case of the appointment of a relative, then, an undertaking from the director/Company Secretary of the company that the similarly placed employees are getting the comparable salary shall also be enclosed along with the application.
(v) List/Particulars of all the employees who are in receipt of remuneration of Rs. 2,50,000 or more per month.
(vi) The total number of relatives of all the directors either appointed as Managing/Whole-time director, Manager or in any other position in the company; the total remuneration paid to each relative and the total remuneration paid to them altogether as a percentage of profits as calculated for the purpose of section 198 of the Companies Act, 1956.
(vii) The selection and appointment of a relative of a director for holding office or place of profit in the company shall be approved by adopting the same procedure applicable to non-relatives. However, in the case of public companies, the selection of a relative of director for holding place of office or profit in the company shall have to be also approved by a Selection Committee.
Documents and particulars to be furnished in the application to the Central Government
The following information shall be given in the application:—
(i) An undertaking from the appointee that he/she will be in the exclusive employment of the company and will not hold a place of profit in any other company.
(ii) The monetary 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.
(iii) Shareholding pattern particularly the shareholding of the directors along with his/her/their relatives, the public holding, institutional holding (each institution separately).
(iv) The educational qualification/experience, pay scale, allowances and other benefits of similarly placed executives. In case of the appointment of a relative, then, an undertaking from the director/Company Secretary of the company that the similarly placed employees are getting the comparable salary shall also be enclosed along with the application.
(v) List/Particulars of all the employees who are in receipt of remuneration of Rs. 2,50,000 or more per month.
(vi) The total number of relatives of all the directors either appointed as Managing/Whole-time director, Manager or in any other position in the company; the total remuneration paid to each relative and the total remuneration paid to them altogether as a percentage of profits as calculated for the purpose of section 198 of the Companies Act, 1956.
(vii) The selection and appointment of a relative of a director for holding office or place of profit in the company shall be approved by adopting the same procedure applicable to non-relatives. However, in the case of public companies, the selection of a relative of director for holding place of office or profit in the company shall have to be also approved by a Selection Committee.
08 July 2013
Specimen of appointment of relative of managing director u/s 314(1B)
RESOLVED THAT pursuant to the provisions of Sections 314(1), 314(1B) and other applicable provisions, if any, of the Companies Act, 1956 and subject to the approval of the Central Government, consent of the Company be and is hereby accorded to Mr. BJ, a relative of Mr. AJ, Chairman and Managing Director of the Company, to hold an office or place of profit as the Financial Controller (US Operations) of the Company for a period of three years commencing from 1st April 2007 or from such date as the Central Government may approve, on the following terms and conditions:
(1) Salary: US$ 12,100 per month, with a provision for increase in salary of not more than 25% per annum over the previous year.
(2) Annual bonus: not exceeding US$ 20,000.
(3) Perquisites and Allowances:
(a) Medical and accident insurance premium as per company rules.
(b) Provision of car on lease.
(c) Leave in accordance with the leave rules of the Company from time to time.
Profile of Mr. BJ
Name: Mr. BJ
Father's Name: Mr. MJ
Date of Birth: 27th February 1956
Explanatory Statement
Mr. BJ is an MBA from Pace University, New York. Mr. BJ was employed at Jefferson Screw and Bolt Industries Inc, New Jersey as an Asst. Controller from 1978-83 and thereafter at M/s M Eagles Tool Warehouse Inc, New Jersey as an Asst. Controller from 1983. He joined Polaris Software Lab Ltd, Iselin, New Jersey in June 2001 as Financial Controller and was made responsible for the complete supervision of Accounts & Finance of US Operations of the Company. Since he is relative of Mr. AJ, Chairman and Managing Director of the Company and his remuneration was exceeding the limits prescribed under
Section 314(1B) of the Companies Act, prior approval of the shareholders at their AGM held on 16th June 2001 and also the approval of the Central Government vide its letter No.XXXX/2001-CL. VII dated 14.11.2002 were obtained by the Company for his appointment upto 31.3.2004. Thereafter, he was re-appointed in the same position for a further period of 3 years commencing from 1.4.2004 and ending on 31.3.2007, and prior approval of the shareholders at their EGM held on 12th March 2004 and also approval of the Central Government vide its letter no. XXXX/2004-CL-VII dated 13.08.2004 were obtained by the Company.
The business of Polaris in the United States has been growing over the years. This growth would need to be supported by efficient controls and processes. Mr. BJ with his vast experience has developed good understanding of the business of the Company and set in place processes and systems for the business of the Company in that region. His scope of work would cover complete control over the financial transactions of the Company in the US, banking, treasury, accounting, MIS, tax and legal compliance. In addition, he would also be in charge of operations on the back office support for sales and marketing. In the light of explanations and justifications given above, it is proposed to re-appoint Mr. BJ as the Financial Controller for its US Operations for period of 3 years commencing from 01.04.2007. The remuneration proposed to be paid to Mr. BJ is commensurate with his experience and is in line with industry standards prevalent in the United State of America. The Board recommends this resolution.
In view of the applicability of the provisions of Section 314 of the Companies Act, 1956, the resolution is required to be passed as a Special Resolution and Mr. BJ's reappointment shall be subject to approval of the Central Government which shall take effect from such date as may be approved by the Central Government in this regard.
The resolution is required to be passed as a Special Resolution and none of the Directors except Mr. AJ, Chairman & Managing Director who is a relative of Mr. BJ, is interested in this resolution.
RESOLVED THAT pursuant to the provisions of Sections 314(1), 314(1B) and other applicable provisions, if any, of the Companies Act, 1956 and subject to the approval of the Central Government, consent of the Company be and is hereby accorded to Mr. BJ, a relative of Mr. AJ, Chairman and Managing Director of the Company, to hold an office or place of profit as the Financial Controller (US Operations) of the Company for a period of three years commencing from 1st April 2007 or from such date as the Central Government may approve, on the following terms and conditions:
(1) Salary: US$ 12,100 per month, with a provision for increase in salary of not more than 25% per annum over the previous year.
(2) Annual bonus: not exceeding US$ 20,000.
(3) Perquisites and Allowances:
(a) Medical and accident insurance premium as per company rules.
(b) Provision of car on lease.
(c) Leave in accordance with the leave rules of the Company from time to time.
Profile of Mr. BJ
Name: Mr. BJ
Father's Name: Mr. MJ
Date of Birth: 27th February 1956
Explanatory Statement
Mr. BJ is an MBA from Pace University, New York. Mr. BJ was employed at Jefferson Screw and Bolt Industries Inc, New Jersey as an Asst. Controller from 1978-83 and thereafter at M/s M Eagles Tool Warehouse Inc, New Jersey as an Asst. Controller from 1983. He joined Polaris Software Lab Ltd, Iselin, New Jersey in June 2001 as Financial Controller and was made responsible for the complete supervision of Accounts & Finance of US Operations of the Company. Since he is relative of Mr. AJ, Chairman and Managing Director of the Company and his remuneration was exceeding the limits prescribed under
Section 314(1B) of the Companies Act, prior approval of the shareholders at their AGM held on 16th June 2001 and also the approval of the Central Government vide its letter No.XXXX/2001-CL. VII dated 14.11.2002 were obtained by the Company for his appointment upto 31.3.2004. Thereafter, he was re-appointed in the same position for a further period of 3 years commencing from 1.4.2004 and ending on 31.3.2007, and prior approval of the shareholders at their EGM held on 12th March 2004 and also approval of the Central Government vide its letter no. XXXX/2004-CL-VII dated 13.08.2004 were obtained by the Company.
The business of Polaris in the United States has been growing over the years. This growth would need to be supported by efficient controls and processes. Mr. BJ with his vast experience has developed good understanding of the business of the Company and set in place processes and systems for the business of the Company in that region. His scope of work would cover complete control over the financial transactions of the Company in the US, banking, treasury, accounting, MIS, tax and legal compliance. In addition, he would also be in charge of operations on the back office support for sales and marketing. In the light of explanations and justifications given above, it is proposed to re-appoint Mr. BJ as the Financial Controller for its US Operations for period of 3 years commencing from 01.04.2007. The remuneration proposed to be paid to Mr. BJ is commensurate with his experience and is in line with industry standards prevalent in the United State of America. The Board recommends this resolution.
In view of the applicability of the provisions of Section 314 of the Companies Act, 1956, the resolution is required to be passed as a Special Resolution and Mr. BJ's reappointment shall be subject to approval of the Central Government which shall take effect from such date as may be approved by the Central Government in this regard.
The resolution is required to be passed as a Special Resolution and none of the Directors except Mr. AJ, Chairman & Managing Director who is a relative of Mr. BJ, is interested in this resolution.
08 July 2013
Board resolution for appointment of relative of director under section 314(1B)
The Chairman informed the Board that looking into the expansion of the business activities and increase in the financial activities of the Company, it is advisable to appoint some responsible and fully qualified officer for discharging the duties of financial officer. He placed before the Board the particulars of Shri GS, the Chartered Accountant, who is also son of Shri HS, the Promoter Director for his appointment as the Chief Financial Officer of the Company. It was also noted that appointment of a relative of Director on a remuneration exceeding Rs. 50,000 p.m. requires approval of the members by way of special resolution subject to approval of the Central Government.
The Board discussed over the matter and considered that the above said matter cannot be put on hold till the next Annual General Meeting, therefore, it would be appropriate to call and hold an Extra Ordinary General Meeting on a shorter notice. The Chairman also placed before the Board, a draft notice of convening the Extra Ordinary General Meeting of the members together with the Explanatory Statement for approval of the Board.
The Board considered the same and being interest in the resolution, Shri HS did not participated in the discussion and decision being interested director. All other directors thereafter, passed the following resolution unanimously:
RESOLVED THAT pursuant to section 314(1B) read with the Director's Relatives (Office or Place of Profit) Rules, 2003 and other applicable provisions of Companies Act, 1956, if any, and subject to the approval of the members of the Company in the General Meeting and the Central Government, and upon the approval of the Selection Committee of the Company to appoint Shri GS as the Chief Financial Officer of the Company on the terms and conditions as placed before the Board and duly initialed by the Chairman for the purpose of identification, w.e.f. 1st June,, 2006.
RESOLVED FURTHER THAT subject to the consent of the members of the Company, the Extra Ordinary General Meeting of the Company be convened on shorter notice at the Registered Office of the Company on 25th July, 2005 at 10.00 A.M. and that the draft notice together with the Explanatory Statement in respect thereof as placed before the Meeting be approved and that Shri VP, the Director
of the Company be and is hereby authorised to issue the notice of the Extra-Ordinary General Meeting, as per the draft placed before the Board to the Members of the Company.
The Chairman informed the Board that looking into the expansion of the business activities and increase in the financial activities of the Company, it is advisable to appoint some responsible and fully qualified officer for discharging the duties of financial officer. He placed before the Board the particulars of Shri GS, the Chartered Accountant, who is also son of Shri HS, the Promoter Director for his appointment as the Chief Financial Officer of the Company. It was also noted that appointment of a relative of Director on a remuneration exceeding Rs. 50,000 p.m. requires approval of the members by way of special resolution subject to approval of the Central Government.
The Board discussed over the matter and considered that the above said matter cannot be put on hold till the next Annual General Meeting, therefore, it would be appropriate to call and hold an Extra Ordinary General Meeting on a shorter notice. The Chairman also placed before the Board, a draft notice of convening the Extra Ordinary General Meeting of the members together with the Explanatory Statement for approval of the Board.
The Board considered the same and being interest in the resolution, Shri HS did not participated in the discussion and decision being interested director. All other directors thereafter, passed the following resolution unanimously:
RESOLVED THAT pursuant to section 314(1B) read with the Director's Relatives (Office or Place of Profit) Rules, 2003 and other applicable provisions of Companies Act, 1956, if any, and subject to the approval of the members of the Company in the General Meeting and the Central Government, and upon the approval of the Selection Committee of the Company to appoint Shri GS as the Chief Financial Officer of the Company on the terms and conditions as placed before the Board and duly initialed by the Chairman for the purpose of identification, w.e.f. 1st June,, 2006.
RESOLVED FURTHER THAT subject to the consent of the members of the Company, the Extra Ordinary General Meeting of the Company be convened on shorter notice at the Registered Office of the Company on 25th July, 2005 at 10.00 A.M. and that the draft notice together with the Explanatory Statement in respect thereof as placed before the Meeting be approved and that Shri VP, the Director
of the Company be and is hereby authorised to issue the notice of the Extra-Ordinary General Meeting, as per the draft placed before the Board to the Members of the Company.
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08 July 2013
Hope the above details will help you.
Hope the above details will help you.
Querist : Anonymous
Querist :
Anonymous
(Querist)
29 July 2013
Thank you sir
29 July 2013
My pleasure dear.............
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