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Remuneration to non executive director

juli (Student CS) (83 Points)

25 May 2016

Dear Sir,

what are the provisions to pay remuneration to non executive director in private limited company?

by providing commission/sitting fees/salary?

can company provide salary to non executive director in private limited company?is it valid?

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5 Replies

DURAI (M.Com MBA CA Final Student) (47 Points)
Replied 25 May 2016

Hi,

U/s 197, Pvt. Ltd. can pay remuneration to NED maximum of 1% of Net profits if company already employs whole time director or managing director

Otherwise 3% of net profit, So the basis of payment to Non Executive Director is net profit of the company for the FY.

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juli (Student CS) (83 Points)
Replied 25 May 2016

THANKS.

BUT ANOTHER QUERY IS THAT THARE IS ANY EXE,PTION TO PRIVATE COMAPNY REGARDING APPLICABILITY OF SEC. 197?

juli (Student CS) (83 Points)
Replied 25 May 2016

THANKS.

BUT ANOTHER QUERY IS THAT THARE IS ANY EXE,PTION TO PRIVATE COMAPNY REGARDING APPLICABILITY OF SEC. 197?

DURAI (M.Com MBA CA Final Student) (47 Points)
Replied 25 May 2016

There is no strict provision for the payment of remuneration to NED in case of Pvt. Ltd. Company and above suggested remuneration is only for Public company

Jatin Bajaj (CS) (2930 Points)
Replied 26 May 2016

Yes, According to section 197(1), second proviso, Remuneration payable to Directors who are neither managing Director nor whole time director shall not exceed 1% of the net profit of the Company if the Company is having managing or whole time Director, but 3% in any other Case, i.e. if Company does not have managing or whole Time Director.

A Director may receive remuneration by the way of fee for attending Board meeting or Committee meeting or for any other purpose as decided by the Board which shall not exceed 1 lakh rupee per meeting of the Board or committee thereof.

And sitting fee payable to Independent Director shall not be less than any other Director.