can a private limited company decrease remuneration? what are the procedure it should follow to decrease the remuneration?
girija.parcha (Parctice) (35 Points)
12 June 2010can a private limited company decrease remuneration? what are the procedure it should follow to decrease the remuneration?
Rasesh
(CS CWA MBA (Fin) B.Com LL.B (Spl))
(6501 Points)
Replied 13 June 2010
In a private limited company, the directors rem is governed by the board only. Hence, increase or decrease in dir rem can be made by the board by passing the requisite board resolutions.
Kalpesh Chauhan,
(Tax Assistant (Accounting Technician CA FINAL CS PROF. PROG. B.Com))
(8310 Points)
Replied 13 June 2010
girija.parcha
(Parctice)
(35 Points)
Replied 14 June 2010
thank you.one more clarification i required. if director of a private company transfers his personal loan to the company, company repaying the loan directly to the bank, can it be treated as company borrowings from finacial institutions, or it is a unsecured loan from a director?
Ankur Garg
(Company Secretary and Compliance Officer)
(114773 Points)
Replied 14 June 2010
As per my understanding director of a private company can transfers his personal loan to the company and company can repay the loan directly to the bank on behalf of director.
The same transaction is would be covered under heading loan to director u/s 295 but section 295 is not applicable to a private company so you may go ahead.
Wait for other expert opinions.
Thanks
Rasesh
(CS CWA MBA (Fin) B.Com LL.B (Spl))
(6501 Points)
Replied 14 June 2010
Director transferring his personal loan to the Company and the Company repaying it may be objected by the auditors as the Company's funds are utilised to repay directors loans. Direct syphoning of funds?
A Better course of action would be that the Company gives out the loan upfront to the Director at market rates. The director repays his loans. The company would show it as loans to director and would earn interest on it.
A still better way is that the private limited company gives remuneration to the Director and some advance remuneration, if required. The director repays his loans. The Company gets the amount as expense in income tax. You will have to justify such amount of remuneration and the sustainability.
If remuneration is not possible, give sweet equity to the Director. The directors sells it off to some promoter who can fund it and use the money.
There are many of such innovative ways. Since i don't know the quantum and other details, cannot think much.
girija.parcha
(Parctice)
(35 Points)
Replied 17 June 2010
ankur ji then that loan shall we treat as loan from financial institution? why i am asking is if it is not a loan from financial institution, interest we should treat as paying to director not to bank, then TDS will attrat on that. am i right
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