15 July 2010
We are doing the audit of a small comany.Here no systematic monthly remuneration is paid to directors.With the amount of Directors expenses like children school fees etc director Remuneration booked.Is this right?
Whether any objection can be raised on it? Is any provision of Co. Law or Sch VI attracted?
15 July 2010
The system fllowed by the Company is not correct. A Company should fix director remuneration and the same should be approved by the board by passing a resolution. The Company should pay the amount to director fixed by the Board in their Board Meeting.
But still Companies are doing these ( basically Pvt. Ltd Companies.)
If you are an auditor of such Company then you can raise a question as to substantiate the Payments made to Directors ( i.e. Board resolution in this behalf)
If the resolutions are there and the same mentions clearly the structure of Directors Remuneration.
if there are no such resolutions you can put a question mark on the management.
Also refer to Companies Act Section 309,310 for the limit, etc.
15 July 2010
In my opinion Private Co can do so. through there current account. They can withdraw against their remuneration as per their needs. Once the remuneration is fixed by board it is up to the director how he uses and withdraw the same.
Important thing is to check is that he may not withdraw more than its remuneration due. Otherwise 2(22)e of IT is attracted.
CAclubindia
