Remuneration to Directors of Private Limited Company
This query is : Resolved
25 April 2020
Company: Private Limited
No. of Directors: 3
Company Incorporated: 01/04/2019
Year closed on 31/03/2020
None of them are appointed as MD/WTD/Manager vide AOA/Board Meeting/GM
But all three worked actively in Company. They are to be given salary/remuneration for 2019-20.
Please explain giving reference to provisions of Companies Act, 2013, how can they be given salary?
No. of Directors: 3
Company Incorporated: 01/04/2019
Year closed on 31/03/2020
None of them are appointed as MD/WTD/Manager vide AOA/Board Meeting/GM
But all three worked actively in Company. They are to be given salary/remuneration for 2019-20.
Please explain giving reference to provisions of Companies Act, 2013, how can they be given salary?
26 April 2020
No restriction under salary/remuneration payment to directors in private limited company.
26 April 2020
But,at least, payment should be supported by a board resolution.
27 April 2020
Firstly, thanking you both sirs for replying.
If Board Resolution required, then as per Section 117, it has to be filed with RoC within 30 days of appointment of MD.
If Board Resolution required, then as per Section 117, it has to be filed with RoC within 30 days of appointment of MD.
21 July 2025
Hey! Let me clarify this for you with reference to the Companies Act, 2013, especially for a Private Limited Company where directors are not appointed as MD/WTD/Manager but are actively working and supposed to get remuneration.
1. Can directors (not appointed as MD/WTD/Manager) get salary/remuneration?
The Companies Act, 2013, does not prohibit payment of remuneration to directors of a private limited company, even if they are not whole-time directors (MD/WTD/Manager).
Directors (other than MD/WTD/Manager) usually receive sitting fees for attending board meetings and general meetings as per Section 197(5).
However, payment of salary/remuneration to non-executive directors (not appointed under any managerial role) is generally not a norm under the Act unless specified by the Articles of Association (AoA) or approved by the company.
2. How can the three directors be paid salary/remuneration?
Since these directors are not appointed as MD/WTD/Manager (i.e., not whole-time directors), their remuneration as salary is not straightforward.
To pay them salary/remuneration:
The company should appoint them as managerial personnel (MD/WTD/Manager) via Board Resolution and (if required) shareholders' approval.
This appointment and terms should be recorded in the Articles of Association (AoA) or amendments made.
The remuneration payable should comply with Section 197 and Schedule V of the Companies Act, 2013.
Otherwise, the directors can be paid sitting fees for their board meeting attendances.
3. Role of Board Resolution
Even if you pay sitting fees or any remuneration, it should be approved by the Board through a Board Resolution.
This ensures the company’s records are updated, and payments are properly authorized.
The Board Resolution should clearly mention the nature and quantum of remuneration or fees payable.
4. Filing with Registrar of Companies (RoC)
Section 117 of the Companies Act requires certain resolutions to be filed with RoC.
For appointment of MD/WTD/Manager, the Board Resolution and relevant forms (like Form MGT-7 or MGT-1 for resolutions) should be filed within 30 days.
If directors are appointed or terms of appointment are changed, these details must be filed timely.
Summary for your case:
Since directors are not appointed as MD/WTD/Manager, paying them a salary as such may not be allowed unless they are formally appointed to those roles.
You can pay sitting fees for their active participation.
To pay salary, first appoint them as managerial personnel through Board and General Meeting resolutions, file the required forms, and comply with remuneration limits.
Board Resolutions are mandatory for payments, and relevant filings with RoC should be done within prescribed time.
1. Can directors (not appointed as MD/WTD/Manager) get salary/remuneration?
The Companies Act, 2013, does not prohibit payment of remuneration to directors of a private limited company, even if they are not whole-time directors (MD/WTD/Manager).
Directors (other than MD/WTD/Manager) usually receive sitting fees for attending board meetings and general meetings as per Section 197(5).
However, payment of salary/remuneration to non-executive directors (not appointed under any managerial role) is generally not a norm under the Act unless specified by the Articles of Association (AoA) or approved by the company.
2. How can the three directors be paid salary/remuneration?
Since these directors are not appointed as MD/WTD/Manager (i.e., not whole-time directors), their remuneration as salary is not straightforward.
To pay them salary/remuneration:
The company should appoint them as managerial personnel (MD/WTD/Manager) via Board Resolution and (if required) shareholders' approval.
This appointment and terms should be recorded in the Articles of Association (AoA) or amendments made.
The remuneration payable should comply with Section 197 and Schedule V of the Companies Act, 2013.
Otherwise, the directors can be paid sitting fees for their board meeting attendances.
3. Role of Board Resolution
Even if you pay sitting fees or any remuneration, it should be approved by the Board through a Board Resolution.
This ensures the company’s records are updated, and payments are properly authorized.
The Board Resolution should clearly mention the nature and quantum of remuneration or fees payable.
4. Filing with Registrar of Companies (RoC)
Section 117 of the Companies Act requires certain resolutions to be filed with RoC.
For appointment of MD/WTD/Manager, the Board Resolution and relevant forms (like Form MGT-7 or MGT-1 for resolutions) should be filed within 30 days.
If directors are appointed or terms of appointment are changed, these details must be filed timely.
Summary for your case:
Since directors are not appointed as MD/WTD/Manager, paying them a salary as such may not be allowed unless they are formally appointed to those roles.
You can pay sitting fees for their active participation.
To pay salary, first appoint them as managerial personnel through Board and General Meeting resolutions, file the required forms, and comply with remuneration limits.
Board Resolutions are mandatory for payments, and relevant filings with RoC should be done within prescribed time.
You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now
Click here to login now
Similar Resolved Queries
Unanswered Queries
- GST registration /aadion a new place of business in the same state and city
- Make-up ITC- Eligibility
- F & O Loss Audit Requirement
- ITC Re-claimable Ledger
- Overtime income in salaried person case
- New tax regime and old tax regime.
- Regarding GST applicability on RWA
- RCM invoice related QRMP
- Upload Verification Error ITR 3 AY205-26
- Preparation of PL BS and presentation in ITR
- Late fee CMP-08 FY 2021-22
- Mismatch in gstr-1 and eway bill invoice no
- Clarification Regarding Tax Deduction at Source on Receipt Against Issuance of Privilege Voucher
- GST TDS on metal scrap
- ITC Inter head difference
- 80CCD(2) of IT ACT
- Guidance for proper GST accounting (eway bill with correct valuation) for cut-to-pack job work given
- GST Treatment multiple delivery services
- Sale of foreign shares in Indian Rupees - FEMA rules
- Calculate Tax Liability of Sharmila
Trending Online Classes
-
Input Tax Credit, GST refunds and Recovery of refunds- Roadblocks and way outs
CA Nipun Arora03 September 2025 -
GST LIVE Certification Course - 43rd Weekdays Batch(With Govt Certificate)
Industry Expert15 September 2025
CAclubindia
