Salary to director in private company

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

01 December 2014 Can salary to director in private company be given if he is non executive director under the Companies Act 2013. If no, what are the formalities under CA 2013.

CS Mitesh Mehta

CS Mitesh Mehta (Expert)
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02 December 2014 YOU CAN PAY SALARY TO NON EXECUTIVE DIRECTOR

Querist : Anonymous

Querist : Anonymous (Querist)

03 December 2014 But Sir regarding appointment of WTD in a Private Company under the Companies Act, 2013 wont be like this?

As soon as we start giving salary to a director, that director becomes a whole time employee of the company. Once a director is a whole time employee than by virtue of Section 2 (94) of Co's Act, 2013 he becomes a Whole Time Director.

Section 196 read with Schedule V of Co's Act, 2013 is applicable on both Private and Public Company.

So if the proposed appointee is a person who complies with Section 196 and SchduleV than no approval of CG is required and only MR-1 along with MGT-14, DIR-12 would be filed with ROC.

please confirm

CS Mitesh Mehta

CS Mitesh Mehta (Expert)
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04 December 2014 non executive director can be paid salary by way of sitting fees and/or commission

Querist : Anonymous

Querist : Anonymous (Querist)

04 December 2014 Sir,
But if we are showing as salary, then?

Aashok Kumar Sharma online

Aashok Kumar Sharma online

(Expert)
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22 July 2025 Good topic! Here's the clear picture on paying salary to a director in a private company under the Companies Act, 2013:

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### 1. **Non-Executive Director (NED) — Salary or Fees?**

* Generally, **Non-Executive Directors are not "employees"** of the company and do not draw a "salary."
* Instead, NEDs are paid **Sitting Fees** for attending Board/Committee meetings and/or **Commission** on profits (subject to limits).
* Payment as **“salary” to a NED is generally not allowed** because they are not whole-time employees.

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### 2. **If Salary is Paid to a Director:**

* If a director **receives salary**, by definition, he/she becomes a **Whole-Time Director (WTD) or Managing Director (MD)**.
* This means the director is an employee and holds an executive position.
* Appointment as a WTD/MD requires compliance with **Section 196 and Schedule V of the Companies Act, 2013**.
* The company must pass a **Board Resolution** and **Shareholders’ approval** (if applicable).
* File **forms MR-1, DIR-12, MGT-14** with the Registrar of Companies (ROC).

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### 3. **So, can you pay “salary” to a Non-Executive Director?**

* **No**, salary is meant for whole-time directors or employees.
* For Non-Executive Directors, payments can only be in the form of:

* Sitting fees (per meeting basis),
* Commission (within limits prescribed under the Act).

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### 4. **If the company still wants to pay salary and call the director "Non-Executive"**

* This is **contrary to law** because paying salary creates an employer-employee relationship.
* The director then **must be appointed as a whole-time director** and comply with statutory provisions.

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### **Summary Table:**

| Director Type | Payment Allowed | Notes |
| ------------------------- | ------------------------ | ---------------------------------------------------------- |
| Non-Executive Director | Sitting fees, commission | No salary, not an employee |
| Whole-Time Director (WTD) | Salary, allowances | Employee, must comply with Companies Act, 2013 formalities |

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### Would you like me to draft the required Board Resolutions or help with ROC filings for appointing a WTD?

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