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Professional fees to director

Achint (Student) (148 Points)

22 July 2009

I have one query, one of my friend has started a company. He is a director in the company but he is also doing job somewhere. They want to start a coaching centre where he along with other director will provide coaching. Can company pay professional fees to them. If yes, do we need to treat it as Managrial Remuneration. They do not want to pay salary to any of the director thanks in advance

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2 Replies

Malav Shah (Company Secretary and AVP Legal) (171 Points)
Replied 22 July 2009

Achint,

I understand that your company is a Pvt. Company. In my opinion, payment of Professional fees to the Directors will attract provisions of sec 314(1) of the Companies Act, 1956. You will require to pass a special resolution for appointment of Director to the "Office or place of profit" and for payment of professional fees.

if your articles provides, salary can also be paid to a non-executive directors because sec. 198, 269, 309 are not applicable to private limited. A Board resolution for payment of salary will be enough.

Regards

Malav Shah