Clarification on Section 314(1B)

This query is : Resolved

Muralidharan (Querist)
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28 June 2011 28th June 2011

Dear Members

Preamble of the Issue

Mr.X is a Director of the Company XYZ Private Limited
Mr.Y is a relative of Mr.X

Mr.Y who is a relative of Mr.X (Director of the Company) is being engaged as a consultant on a monthly payment of Rs.50000/-. The provisions of Section 314(1B) is attracted for the above said appointment of Mr.Y as consultant. In my opinion this requires the following approval:

(1) Board of Directors prior approval.
(2) PRIOR approval of the Members of the Company by way of Special Resolution [Section 314(1B)]
(Note : Central Govt. approval is not required since the payment does not cross Rs.50000/-)

My interpretation of Section 314 is as follows:

(1) Monthly Remuneration upto Rs.9,999/- Prior Board approval

(2) Monthly Remuneration from Rs.10,000/- to Rs.19,999/- Prior Board Approval and Members approval at the next General Meeting

(3) Monthly Remuneration from Rs.20,000/- to Rs.50,000/- Prior approval of the Board and Prior approval of the Members

(4) Monthly Remuneration over and above Rs.50,000 - Prior approval of Board, Prior approval of the Members and Central Government.

The above appointment falls under Point No.3 of my interpretation. Kindly advise in this regard.

with regards

Murali

Jayashree S Iyer

Jayashree S Iyer (Expert)
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29 June 2011 Your understanding is perfect. Board and Shareholders approval is sufficient.

CG approval is required only when the remuneration exceeds Rs.50,000/-.

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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29 June 2011 Jayasree Ji

Directors Relatives (Office or Place of Profit)Rules,2003 has been amended by notification FNo.17/75/2011 CLV dated 06/04/2011 through which the amount of Rs.50,000/- is enhanced to Rs.2,50,000/-.

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