Professional Fees Given to Director

The following abstract may solve your query:  

Under the proviso to sub-section (1) of Section 309, no sanction is required from the Central Government in respect of payment of remuneration for professional services rendered by Directors. All that is required is the expression of opinion by the Central Government to the effect that the Director possesses the requisite professional qualifications. In other words, the Central Government’s approval is required merely by way of confirmation of the Director’s professional qualification and not in respect of the specific remuneration paid of the Director for his professional services. Such approval and confirmation by the Central Government may well be implied in the case of those professions-such as the legal profession and the accountancy profession-where the practice of the profession is not legally possible unless the person concerned is a member of a recognized institute or body. In the question under consideration, therefore, the Central Government’s approval of the Director’s legal qualifications may well be implied by the very fact that the Director is an advocate practicing in the High Court as well as the Supreme Court. However, although such approval by the Central Government of the Director’s professional qualifications may be implied by virtue of his having a recognized professional standing, the Companies Act itself does not indicate whether specific approval is required, or implied approval is sufficient.

Consequently, the safer course of the company would be to seek a specific confirmation from the Central Government approving the Director’s professional qualifications. Thereafter, the payment or remuneration to such Director for his professional services would not require any further permission by the Central Government in respect of the amount of that remuneration.

regards

Manivannan J