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Section 309(1)(b) Section 314(1)

Preeti Gandhi (Company Secretary) (90 Points)

04 October 2010

A director (in a public Company) receiving sitting fees has been appointed as an
advisor(rendering professional services) in the Company for monthly
remuneration.

Whether section 314(1) will be attracted. or mere opinion of CG u/s 309(1)(b)
will be required.

Please advise.

Thanks

Preeti Gandhi

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2 Replies

Ajay Mishra (Company Secretary) (74337 Points)
Replied 05 October 2010

Dear Friend

Section 309 (2) of the Companies Act, 1956 provides that a director may receive remuneration by way of a fee for each meeting of the Board or a committee thereof attended by him. While sitting fee payable to the directors shall not be included in overall maximum limit of 11% of total remuneration payable by a public company to its directors.

Sitting fee may be paid only to a director who is not a managing director or whole time director i.e. sitting fee may be paid to a non-executive director only. {Department Letter No. 3/1/90CL_V, dated 18^th August, 1990}.

The director received sitting fee as remuneration from the company and also take monthly remuneration monthly for rendering service in professional nature is covered under section 314, because the director received any amount over and above of the director remuneration will cover section 314.

Regards

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Ankur Garg (Company Secretary and Compliance Officer) (114773 Points)
Replied 05 October 2010

Hi,

Let me share something to the point.

Sitting fee is not a part of managerial remuneration u/s 309(2). So it is not falling u/s 314(3) i.e. the definition of Office or place of profit.

Now you are going to appoint him as an advisor on monthly remuneration being a professional. In this scenario if he clears the criteria given in proviso to section 309(1) along with CG Approval subject to CG’s approval of his professional qualification, his salary would not be considered as managerial remuneration for the purpose of section 309.

In your case section 314 is not applicable.

Thanks