Remuneration to Non Exe Director

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Querist : Anonymous

Querist : Anonymous (Querist)

09 May 2011 Whether a company can pay remuneration to a non exe director for his technical expertise under consultancy contract, apart from sitting fees for attending board meetings.

udit sharma

udit sharma (Expert)
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09 May 2011 As per the provisions of section 309 of the Companies Act, 1956, remuneration shall include the amount paid for any services rendered by a Director in any other capacity. However, this will not be included if the services rendered are of professional nature and in the opinion of the Central Government, the concerned Director possesses requisite qualification and experience to practice such profession.

Hence,a Non Executive Director may be paid fees for the rendered by him any other capacity other than the sitting fees and such fees shall not be included in the limit of remuneration prescribed under Section 309 ofthe Companies Act, 1956 if in the opinion of the Central Government, ur Director possesses requisite qualification and experince to practice the profession.

God Bless

CS Udit Sharma

Querist : Anonymous

Querist : Anonymous (Querist)

09 May 2011 Thanks Dear...
futher if the Director is relative of an Executive Director as well as hodling requisite qualification and experience then what are the compliances the company has to make.

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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21 July 2025 Great question! Let me break it down clearly for you regarding remuneration to a Non-Executive Director (NED) under the Companies Act, 1956, especially when paid for technical expertise under a consultancy contract, and the added complexity if that NED is a relative of an Executive Director.

1. Payment to Non-Executive Director for Services Other Than Sitting Fees
Under Section 309 of the Companies Act, 1956, remuneration to directors includes all fees and payments for services rendered in any capacity.

However, fees paid to a director for professional services rendered are excluded from this limit if:

The services are of a professional nature.

The director possesses the requisite qualifications and experience to practice that profession.

This is subject to the approval/opinion of the Central Government.

So, technically:

A Non-Executive Director can be paid remuneration for technical/consultancy services under a separate contract.

These fees do not count toward the limits under Section 309 if the above conditions are met.

2. If the Director is a Relative of an Executive Director
When the NED receiving fees for consultancy services is a relative of an Executive Director and also possesses the necessary qualifications, the company must take additional care due to related party transactions and conflict of interest concerns.

3. Compliance Requirements in this Case
Board Approval:

The contract or arrangement with the director (relative) must be approved by the Board of Directors.

Interested directors (i.e., the Executive Director who is a relative) should not participate in the approval discussions/voting.

Shareholders’ Approval:

If the remuneration or contract exceeds prescribed limits or involves related party transactions, approval from the shareholders in a General Meeting may be required under Section 297 (related party contracts).

Central Government Approval:

Since the fees paid to the director for professional services are excluded from Section 309 limits only with the CG’s opinion, the company may have to seek approval from the Central Government confirming:

The director has the requisite qualification and experience.

The nature of the services is professional.

Disclosure in Annual Accounts:

The payments must be disclosed as related party transactions in the notes to accounts.

Auditor’s Certification:

The auditor may need to certify that the payments are in accordance with the law and that the director possesses the qualifications.

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