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Employment of relative in Company by a Director

CA Mallika Chaudhary (CWA Final and CA) (418 Points)

15 October 2010

Dear All

" Mr X, a director of XYZ Pvt Ltd , is 59% stakeholder in it. There are other individual board members also. Is he legally required to declare to the Board that his sister is an employee of the Company ?"

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6 Replies

Puneet (learner) (105 Points)
Replied 16 October 2010

Hello

in my personal opinion a special resolution is required for the appointment of a relative of a director at an office or place of profit carrying a monthly remunaration of rs 10000 or more.

So here they need to pass A Special Resolution to appoint his sister as an employee if she gets remunaration more than 10000.

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CA Mallika Chaudhary (CWA Final and CA) (418 Points)
Replied 16 October 2010

Any relevant section... ?? Coz i cud not find the limit and the clause u mentioned above anywhere....

Thanx for the reply !!!

rvsekar2000 (212 Points)
Replied 16 October 2010

Hello ,

The query does not speak about the salary of the sister of the MD.

Payment of remuneration to any relative of director in excess of Rs 10000 per month requires passing of special resolution and consequent filing of Form 23.

And if such remuneration exceeds Rs 50000 per month then special resolution and CG approval is also required.

This is requirement of section 314 of the Companies Act 1956 and such payments are called holding of “office or place of profit.”

SECTION 314 (1) (B) APPLIES TO ALL COMPANIES INCLUDING PRIVATE LIMITED COMPANIES.

R.V.Seckar

Pl do visit my blogs :https://rvsekar.blogspot.com/

https://rvseckarfema.blogspot.com/

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Ankur Garg (Company Secretary and Compliance Officer) (114773 Points)
Replied 16 October 2010

Trust my reply to your profile would be of some help...

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CA Mallika Chaudhary (CWA Final and CA) (418 Points)
Replied 16 October 2010

Originally posted by : Ankur Garg
	Trust my reply to your profile would be of some help...

It helped allot Sir !!! I understood the condition of "contract or arrangements" u/s 297 of the Act only after I read your post today !!! Thanks allot !!! I had got confused due to the case law of A. Sivasailam which was referred to in many of the books as the basis for disclosure of Interest by the Director u/s 299 of the Act...it was about the employment of his daughter in the Company.

Thanks allot Sir for your reply !!!