Dear Mr. Ankur Garg,

Please clarify my further query posted on 01.04.2010.

Thanks,

Ankur Sir,

Plz also clarify that if a pvt. co. is willing to pay any amount monthly to a director is it necessary to appoint him as a WTD? Can it not be paid under section 314 by holding an EGM, passing a special resolution and filing Form 23 i.e. director holding office or place of profit?

Dear Mr. Satendra Kumar,

As far as I interpret the provisions of the Companies Act, 1956, i believe that there is no need to appoint the employee as WTD just bcoz you want to continue the payment of remuneration to that employee. Section 269 is not applicable to pvt. cos. so there is no need to pass a special resolution at EGM for appointing him as WTD. However u/s.314 you can pay him remuneration by passing a special resolution at EGM but you need to appoint him as an additional director first. Thus first file Form 32 then Form 23. 

Others views are solicited.

i have the same query i want to appoint Director as WTD with remuneration of more than as specified in Sch XIII. its a public Limited Company. so i have to take Central Govt. approval?? i heard that it is possible without that also.. is it true??? can any one help me on this?? and company have to entered into agreement so if u have draft for WTD kindly share it

Originally posted by : CA.Satendar Kumar
	Dear Mr. Ankur,   In your earlier reply, you have stated as under: -   "First you have to appoint him as additional director as per section-260. Then pass the next resolution to appoint him as WTD.   Further if you fail to regularise him as regular director then he will automatically cease to be a WTD.     So the agenda of your BM would be: 1. Appointment of Mr. X as Additional director. 2. Appointment of Mr. X as WTD."   My further query is as under: -   Appointment of Additional Director in BM is OK.   But as far as appointment of WTD in BM is concerned, I have gone through the AOA of the Pvt. Ltd. Company and there is no such provision in AOA. The relevant articles relating to directors appointment and remuneration, in brief, are reproduced as under:-   24. "The Directors may from time to time, appoint one or more of their body to the office of the Managing Director................." 25. "The Directors shall have the power to appoint any person as Additional Director............" 26. " The MD may be paid such remuneration as may be determined by the Board....................." 32. "Subject to the provisions of the Co. Act, 1956 the director shall receive such remuneration for their services as may be determined by the Company in GM or as may be contained in an agreement, if any, between the company and any Director or Directors"   None of the above mentioned Articles say anything about appointment of WTD in the Board Meeting. In this situation, in my opinion, the appointment of WTD is to be made by Co. in GM and not by the Board. Else AOA is to be amended accordingly.   Please clarify. Thanks

Simply pass board resolution to appoint WTD. For appointment of WTD AOA authorisation is not required.

Dear Jyoti,

 We are having this remuneration discussion with regard to a director of a Pvt. Ltd. Company. In a public limited company a director cannot be paid remuneration unless he is appointed as a WTD. As per Section 309(3) "except with the approval of the Central Government such remuneration shall not exceed 5% of the net profits for one such director, and if there is more than one such director, 10% for all of them together" Thus you need to take Central Government approval.

Originally posted by : RITU BAJAJ
	Ankur Sir, Plz also clarify that if a pvt. co. is willing to pay any amount monthly to a director is it necessary to appoint him as a WTD? Can it not be paid under section 314 by holding an EGM, passing a special resolution and filing Form 23 i.e. director holding office or place of profit?

No Ritu there is no need to appoint any director as WTD just for giving remuneration. You can pay remuneration to an ordinary director u/s 309(4).

Further there is no need for any resolution u/s 314. Section 314 is applicable if and only if it is director is on office or place of profit.

Sir plz clarify what are the offices or places of profit? My concept is not clear about it as to when section 314 gets attracted?

Originally posted by : RITU BAJAJ
	Dear Jyoti,  We are having this remuneration discussion with regard to a director of a Pvt. Ltd. Company. In a public limited company a director cannot be paid remuneration unless he is appointed as a WTD. As per Section 309(3) "except with the approval of the Central Government such remuneration shall not exceed 5% of the net profits for one such director, and if there is more than one such director, 10% for all of them together" Thus you need to take Central Government approval.

Dear Ritu,

You have used this line in your previous reply which is not correct read with section 309(4). In a public limited company a director cannot be paid remuneration unless he is appointed as a WTD.

Kindly check yourself and revert.

ya ritu that i knw 5% and over all 10% limit. but my confusion is that is it poss with out CG approval???

or else we have to obtain the approval??

I dont hope so that it is possible without Central Govt. Approval. Wait for others views

Originally posted by : Jyoti
	i have the same query i want to appoint Director as WTD with remuneration of more than as specified in Sch XIII. its a public Limited Company. so i have to take Central Govt. approval?? i heard that it is possible without that also.. is it true??? can any one help me on this?? and company have to entered into agreement so if u have draft for WTD kindly share it

Dear Jyoti,

Remuneration of WTD in a public company is governed by section 309(3) read with section 198. However in case of absense or inadequacy of profit you may pay remuneration as per sch XIII. 

Payment of remuneration under sch XIII is dependent on your effective capital and selection of one remuneration table out of three tables. If you choose second table i.e. not exceeding 48 lacs than there is no need to go for CG approval. In that case you have to comply with conditions of table (B) of sch XIII.

However previous CG approval is required if you wanted to pay as per table third i.e more than 48 lacs.

Regards

Originally posted by : Jyoti
	ya ritu that i knw 5% and over all 10% limit. but my confusion is that is it poss with out CG approval???   or else we have to obtain the approval??

It is possible provided remuneration is not more that 48 lacs p.a. read with schedule XIII.

Dear Ankur,

Thanks alot.... nw my concept is clear. i m going to pya more thn 48 so i have to take CG approval...

once again thanks.. regards

Originally posted by : Ankur Garg
	Originally posted by : RITU BAJAJ Dear Jyoti,  We are having this remuneration discussion with regard to a director of a Pvt. Ltd. Company. In a public limited company a director cannot be paid remuneration unless he is appointed as a WTD. As per Section 309(3) "except with the approval of the Central Government such remuneration shall not exceed 5% of the net profits for one such director, and if there is more than one such director, 10% for all of them together" Thus you need to take Central Government approval.   Dear Ritu, You have used this line in your previous reply which is not correct read with section 309(4). In a public limited company a director cannot be paid remuneration unless he is appointed as a WTD. Kindly check yourself and revert.

Dear Ankur Sir,

Its true that a director can be paid remuneration but its only possible by having consent of the Central Government. While in most of the moderate level of corporate houses people do hesitate or we can say they try to avoid approach to Central Govt. for approval.

Thus in that case the normal practice is that the director is appointed as a WTD if they need to pay him remuneration.

Plz comment on above.