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Issue Relating to WTD_Urgent

Mayuri Lal (officer CS) (748 Points)

09 May 2011

dear members,

1. Can a WTD of listed co. (say A) be paid remuneration from subsidiary (a public co. – say B) of the A, when the WTD of A is not holding any directorship in B?

2. Will the situation change if the WTD is appointed as president of B?

rEGARDS,

mAYURI lAL

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8 Replies

SANTOSH SHAH (Company Secretary) (754 Points)
Replied 09 May 2011

Originally posted by : Mayuri Lal
	dear members, 1. Can a WTD of listed co. (say A) be paid remuneration from subsidiary (a public co. – say B) of the A, when the WTD of A is not holding any directorship in B? 2. Will the situation change if the WTD is appointed as president of B? rEGARDS, mAYURI lAL

Hi Mayuri

In my view,

1. Remunneration from Subsidiary cannot be paid to the WTD though he is not holing any directorship in 'B'.

Reason: The person to be paid remuneration holding an office in subsidiary (in whatever capacity) will

violate the provisions of section 314 (1)(a) which states

" (a) no director of a company shall hold any office or place of profit,"

in company or subsidiary company. Also the remunerration so received needs to be returned back .

But by passing special resolution at the general meeting & consent of company ,

office of place of profit be held in subsidiary.

2. The answer for your 2nd question depends on what capacity the person is in Company B.

If the WTD (who is in executive capacity in 'A') holds any position or office ( executive nature) then

he is holding office of place of profit. Section 314 will attract.

If the WTD is holding his position in 'B' as Non-Executive then Section 314 Will not attract.

Other members views solicited, as this section is little complex in terms of understanding.

regards

Santosh Shah

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Mayuri Lal (officer CS) (748 Points)
Replied 09 May 2011

I THINK WE CANNOT DO SO

BUT NOW IF I PUT THE QUESTTION IN THIS WAY THEN:

Holding Company pays to E.D .

E.D is getting paid for the operations carried on by him in the subsidiary Co. ok.

Now Holding Company asks the subsidiary co. to reimburse the payment made to E.D.

Is it permissible??????????

SANTOSH SHAH (Company Secretary) (754 Points)
Replied 10 May 2011

Originally posted by : Mayuri Lal
	I THINK WE CANNOT DO SO BUT NOW IF I PUT THE QUESTTION IN THIS WAY THEN: Holding Company pays to E.D . E.D is getting paid for the operations carried on by him in the subsidiary Co. ok. Now Holding Company asks the subsidiary co. to reimburse the payment made to E.D. Is it permissible??????????

Hi Mayuri

As per my understanding on 314, when a person is acting as Executive Director in

2 companies, Section 314 will attract . ( Office of place of profit).

E.D though paid in Subsidiary company has to return back the amount as he is getting from Holding Co.

Finally the ED is entitled only for single remunneration.

Even if Holding Co asks subsidiary to reimburse ED, it cannot be done as it will violate 314.

ED has to return the amount.

But if the person acting as NED in Subsidiary he can claim for sitting fees / consultancy fees.

Other views solicited

regards

Santosh Shah

Mayuri Lal (officer CS) (748 Points)
Replied 10 May 2011

c the scenario is a bit different

Holding co. payes to his wtd rite

n WTD performing function of subsidiary ok.

Now holding company asking to reimburese the payment made to the WTD.??

Is it permissible??

if u see the WTD is out of the scene now and its only regarding the transactions between the Companies.

There for in teh above case 314 does not come into picture.

i may be rong

SANTOSH SHAH (Company Secretary) (754 Points)
Replied 10 May 2011

Originally posted by : Mayuri Lal
	c the scenario is a bit different Holding co. payes to his wtd rite n WTD performing function of subsidiary ok. Now holding company asking to reimburese the payment made to the WTD.?? Is it permissible?? if u see the WTD is out of the scene now and its only regarding the transactions between the Companies. There for in teh above case 314 does not come into picture. i may be rong