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Office or Place of Profit u/s 314

Ruchie Khanna (Company Secretary) (123 Points)

12 June 2010

Dear All,

Mine is a Public unlisted closely held company. There are 2 individuals holding place of profit in the Company. As per the Directors Relatives' (Office or place of profit) Rules, 2003 appointment of individual under u/s 314 has to be approved by a "Selection Committee" of major independent directors and an expert in the field from outside.

My company does not have a Selection Committee nor any independent Directors on the Board. Now the Directors propose to increase the remuneration of the individual holidng place of profit.

My query is that will the Company need to form a Selection committee and for the same appoint independent directors??

Pl. help.

Thanks & Regards,

Ruchie

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10 Replies

Akhil Gupta (Manager F&A) (856 Points)
Replied 12 June 2010

Originally posted by : Ruchie Khanna
	Dear All, Mine is a Public unlisted closely held company. There are 2 individuals holding place of profit in the Company. As per the Directors Relatives' (Office or place of profit) Rules, 2003 appointment of individual under u/s 314 has to be approved by a "Selection Committee" of major independent directors and an expert in the field from outside. My company does not have a Selection Committee nor any independent Directors on the Board. Now the Directors propose to increase the remuneration of the individual holidng place of profit. My query is that will the Company need to form a Selection committee and for the same appoint independent directors?? Pl. help. Thanks & Regards, Ruchie

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Kalpesh Chauhan, (Tax Assistant (Accounting Technician CA FINAL CS PROF. PROG. B.Com)) (8311 Points)
Replied 12 June 2010

I am not getting know what akhil try to say.

Rasesh (CS CWA MBA (Fin) B.Com LL.B (Spl)) (6501 Points)
Replied 13 June 2010

If the two individuals are getting rem in excess of Rs. 50K, then CG approval is required as per the above referred rules. Other provisions of the rules also have to be complied with. There is no way it can be ignored.

One escape route is to appiont these two individuals as WTD and give them rem as per SCH XIII.

1 Like

vivek (CS) (751 Points)
Replied 15 June 2010

you will have to constitute the selection committee

Vasant Patel (Proprietor) (47 Points)
Replied 24 July 2010

Dear Sir

If Any persons holding place of pfotit under the Company having remuneration of Rs. 25000/- should Company require priior approval of members prior to holding place of profit by such relative ?

Pl carify

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Jagruti (CS) (Service) (1953 Points)
Replied 24 July 2010

Yes remuneration between 10,000 to 50,000 will require prior approval by special resolution

vivek (CS) (751 Points)
Replied 24 July 2010

yes, prior approval by SR required.

Ruchie Khanna (Company Secretary) (123 Points)
Replied 26 July 2010

Dear All,

I have a query..X individual is receiving remuneration is exceeding Rs. 50000/- and the necessary SR and form for CG approval has been filed..My query is can the company pay remuneration now or does it need to wait for CG approval..

How long woul;d the CG approval roughly take??

Thanks & Regards,

Ruchie

Rasesh (CS CWA MBA (Fin) B.Com LL.B (Spl)) (6501 Points)
Replied 26 July 2010

You will have to wait for CG approval. Time taken would depend upon your liasoning with CG. Generally it should take around 3-6 months.

(Guest)

The selection and appointment of a relative of a director holding office or place of profit in the company shall be approved by adopting the same procedure applicable to non-relatives : Provided that, in the case of listed public companies, the selection of director for holding place of office or profit in the company shall have to be also approved by a Selection Committee. Explanation.- For the purpose of this sub-rule, the expression “Selection Committee” means a committee, the majority of which shall consist of independent directors and an expert in the respective field from outside the company: Provided that in case of unlisted companies, independent directors are not necessary but outside experts should be there in the Selection Committee: Provided further that in the case of private companies, independent directors and outside experts are not necessary.