Guarantee Commission (Corporate Law)

This query is : Resolved

Rishi Vyas

( Author )
15 October 2010

How the commsssion be paid to Directors for the guarantee given by them?

Regards,
Rishi

B.Chackrapani Warrier

( Expert )
15 October 2010

Guarantee commission paid to directors is not a remuneration within the meaning of Section 309 of the Companies Act,1956 and therefore, approval of Central Government is not necessary.

Rishi Vyas

( Author )
16 October 2010

Is a Board resolution sufficient to pay guarantee commssion to the Director?

Regards,
Rishi

Ajay Mishra

( Expert )
20 October 2010

Hi

Payment of guarantee commission
In Suessen Textile Bearings Ltd v. Union of India[30], the court held that guarantee commission paid to directors for giving surety against loans on credit facilities taken by the company from financial institutions is not remuneration for any professional services within the meaning of S. 309 and therefore, approval of central government is not required. The directors rendering guarantee does not render manual, clerical, technical, supervisory or administrative service. He gets the commission for the risk which he bears and that has nothing to do with his directorship.

Regards

Ajay Mishra

( Expert )
20 October 2010

Board of Directors of the company will consider on the above matter.