Dear Paras…![](/ckeditor/plugins/smiley/images/shades_smile.gif)
With regard to ur query there could be two situation:
1. He was appointed as a Director when no relative of his was there on the board and subsequently he was appointed as a Managing Director when a relative of his was there on the board.
2. He was appointed as a Director when there was a relative of his on the board and subsequently he was appointed as a Managing Director his relative still there on the board.
Now as per the provisions of 314 the company will deal as follows:
It is presumed that his appointment as a Director was made for a monthly remuneration of Rs. 10,000/- or more.
Situation I.:
Since none of his relative of Mr. X is there on the board at the time of his appointment as a Director Section 314 will not apply and Mr. X will be appointed as a Director in the General Meeting through ordinary resolution.
When Mr. X is appointed as the Managing Director he has a relative on the board hence, Section 314 will be applicable. As mentioned his monthly remuneration is Rs. 70,000/- hence MR. X needs to obtain:
· PRIOR consent of Shareholders by SPECIAL RESOLUTION in the General Meeting.
· AND Approval of Central Government.
Situation II.:
Since at the time of appointment of Mr. X as Director of the Company, a relative of his was there on the Board and as presumed his monthly remuneration as a director is above Rs 10,000/- per month Section 314 will be applicable.
Hence Mr. X needs to obtain:
· PRIOR consent of Shareholders by SPECIAL RESOLUTION in the General Meeting.
· AND Approval of Central Government.
Again when Mr. X is appointed to the Office of Managing Director having a monthly remuneration of Rs. 70,000/- still having his relative on the board he needs to obtain:
· PRIOR consent of Shareholders by SPECIAL RESOLUTION in the General Meeting.
· AND Approval of Central Government
In situation II when Mr. X is appointed as Managing Director he needs to obtain the prior consent of Shareholder through Special Resolution and Prior Approval of Central Government both time as Mr X exceeds the monetary limit of Rs.10,000/- and Rs. 50,000/- fixed by Section 314 of The Companies Act, 1956.
Hope it solves your query….!!!!
For further clarification please refer to my Article on Section 314.
Take care.
Kumar![:) :)](/ckeditor/plugins/smiley/images/regular_smile.gif)