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UMA NIPUN LODHA (Querist)

02 February 2012 In a pubic Company having paid up Capital more than 5 Crores a person has been appointed as an Non Executive Director. He is not paid anything directly but prior to his appointment (and still today) his wife is drawing a consultancy fee and also consultancy fee is paid to one of the fim in which this appointtee is a proprietor/partner. Please let me hnow which Sections will be applicable and what compliances needs to be in this respect. As per my rough knowlede Section 297 and Section 314 will be applicable. Please correct me if I am wrong.

udit sharma

udit sharma (Expert)

02 February 2012 Hi!

In my opinion neither Section 297 nor Section 314 of the Companies Act, 1956 shall apply.

Section 297

Since the paid up share capital of the Company is more than one crore rupees, prior approval of the Central Government has to be obtained for entering into a consultancy contract with wife of Mr. A. In this case Mr. A was appointed as Director of the Company after such consultancy contract had been entered into between the Company and Mrs. A. Hence, the question of obtaining the prior approval of the Central Government does not arise here.

Section 314

Sub -Section (1A) of Section 314 clearly provides that Section 314 (1) will not be applicable where relative of Director has been appointed to an office or place of profit prior to appointment of a person as Director of the Company.

Regards

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