Ca final - law - director - 314

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Krishna seva das (Querist)
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25 October 2013 CA FINAL - LAW - DIRECTOR - SECTION 314 - DIRECTOR NIT TO HOLD OFFICE AND PLACE OF PROFIT...??? PLEASE EXPLAIN WITH EXAMPLE...

Ajay Mishra

Ajay Mishra (Expert)
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28 October 2013 Hi

As per section 314(3), a director is said to be holding 'Office or Place of Profit' in a company, if he obtains from the company in addition to the remuneration to which he is entitled as a director any salary, fees, commission or any other perquisites while holding the office of a director.
An individual other than a director or any firm, private company or body corporate is said to be holding office or place of profit in a company, if they obtain from the company, by way of remuneration, any salary, fees, commission or any other perquisites while holding the office or place of profit in the company.

Section 314 is applicable to both public and private companies.

Ajay Mishra

Ajay Mishra (Expert)
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28 October 2013
Office or Place of Profit held by director in the company:

As per section 314 certain persons cannot be appointed or allow to hold an office or place of profit in the company unless, they comply with the requirement of the provisions of this section. If any person is proposed to hold such office or place of profit in the company then company has to take consent of the shareholders by passing special resolution in the general meeting of the company.

No such consent is required, if a director receiving remuneration by holding such office or place in subsidiary of the company returned such remuneration to the subsidiary or its holding company.

The Department has instructed that any appointment of director of the company as also its secretary, without any managerial power or vice versa shall not require approval of the Central Government. However, special resolution under section 314(1) to that effect is need to be passed if remuneration is in excess of Rs. 10,000 p.m.

Ajay Mishra

Ajay Mishra (Expert)
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28 October 2013
Scope of the term 'Office or Place of Profit' in a company

The section 314 regulates all such kinds of office or place of profit where any of the persons mentioned therein is required to perform functions on behalf of a company under the control, direction and supervision of the company. In general, there should be employer-employee relationship or that of principal-agent. The person appointed to the office should be required to render duties, services and functions under the instructions of the company concerned. Accordingly, just because some remuneration like fees or other sums are received from the company, will not make such transactions fall under the prohibition under the section.
The words 'office or place of profit' occurring in section 314(1) include selling and buying agents receiving commission and/or salary. [CIT v Principal Officer C/o Arkay Wires (P.) Ltd. (2005) 58 SCL 97 (All.)].

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