Sec. 374(1) of co. act
This query is : Resolved
CA Sahil Singla..
(Querist)
27 August 2011
Whether Sec. 314(1) of Co. Act is applicable in case a person is appointed as a manager ? It clearly says that it's not applicable but most of the answers r not considering this exemption. Even ICAI's suggested of CA Final Nov 2010 Exam says that appointment of manager is regarded as a appontment to place of profit in Co.
27 August 2011
First need to define the place of profit.....so post of the manager is a place of profit so section 314 is applicable if other condition is fulfilled.
CA Sahil Singla..
(Querist)
27 August 2011
Sec 314(1) specifically Exempts follwing persons from it's scope-
1. MD
2. Manager
3. Trustees of debenture
4. Banker of CO.
THen how is manager covered under 314(1)
1. MD
2. Manager
3. Trustees of debenture
4. Banker of CO.
THen how is manager covered under 314(1)
23 July 2025
### **Section 314(1) of the Companies Act, 1956**
**Section 314(1)** of the Companies Act, 1956 regulates the appointment of **relatives of directors** to certain offices in a company, including the **managerial positions**. It prescribes restrictions on the remuneration that can be paid to a person in such a capacity, particularly when a **relative of a director** is appointed to a managerial position, such as **manager**, **secretary**, or **any other place of profit** in the company.
### **Applicability of Section 314(1):**
Section 314(1) applies when the company proposes to appoint a **relative of a director** to any office or place of profit (like manager) in the company and provides certain conditions under which such appointments can be made.
However, **Section 314(1) does not apply to**:
1. **Managing Director (MD)**
2. **Manager**
3. **Trustee of Debenture holders**
4. **Bankers of the Company**
### **Key Point: Exemptions under Section 314(1)**
As per **Section 314(1)**, appointments of a **Manager** are **exempt from its provisions**.
1. **Manager** is specifically **exempt** under **Section 314(1)**, so when a person is appointed as a **manager** (even if they are a relative of a director), the provisions of **Section 314(1)** do not apply.
2. The **managerial position** is not treated as a "place of profit" under **Section 314(1)**, as the term **place of profit** excludes persons holding the posts of **Managing Director (MD)**, **Manager**, or **Bankers**.
Thus, the **appointment of a manager** is **not governed by Section 314(1)**, even if the manager is a relative of a director.
### **What Does "Place of Profit" Mean?**
* A **place of profit** generally refers to a position in a company where a person derives a remuneration (salary, bonus, commission, etc.) above a specified amount and is given a certain amount of responsibility or authority in the company.
* However, the **manager** and **MD** are **excluded** from the definition of "place of profit" in Section 314(1), meaning their appointments are not subject to the restrictions of Section 314(1), even if they are **relatives of directors**.
### **Clarification on ICAI's Suggested Answer:**
* It’s important to note that while the **ICAI** may have discussed the concept in their **suggested answers**, they might have done so in the context of understanding the legal nuances of **"place of profit"**.
* The **manager** is still a person holding a "place of profit," but the specific exemption under Section 314(1) means that **relatives of directors can be appointed as manager** without triggering the restrictions that Section 314(1) would otherwise impose.
### **In Conclusion:**
* The **manager** role is explicitly **exempted from Section 314(1)** of the Companies Act, 1956.
* Therefore, **relatives of directors can be appointed as a manager** in a company without the need for approval or restrictions under Section 314(1).
* While the **manager** is still in a "place of profit" under the broader context of the Act, the section itself **does not impose restrictions** on managerial appointments.
Let me know if you need further clarification!
**Section 314(1)** of the Companies Act, 1956 regulates the appointment of **relatives of directors** to certain offices in a company, including the **managerial positions**. It prescribes restrictions on the remuneration that can be paid to a person in such a capacity, particularly when a **relative of a director** is appointed to a managerial position, such as **manager**, **secretary**, or **any other place of profit** in the company.
### **Applicability of Section 314(1):**
Section 314(1) applies when the company proposes to appoint a **relative of a director** to any office or place of profit (like manager) in the company and provides certain conditions under which such appointments can be made.
However, **Section 314(1) does not apply to**:
1. **Managing Director (MD)**
2. **Manager**
3. **Trustee of Debenture holders**
4. **Bankers of the Company**
### **Key Point: Exemptions under Section 314(1)**
As per **Section 314(1)**, appointments of a **Manager** are **exempt from its provisions**.
1. **Manager** is specifically **exempt** under **Section 314(1)**, so when a person is appointed as a **manager** (even if they are a relative of a director), the provisions of **Section 314(1)** do not apply.
2. The **managerial position** is not treated as a "place of profit" under **Section 314(1)**, as the term **place of profit** excludes persons holding the posts of **Managing Director (MD)**, **Manager**, or **Bankers**.
Thus, the **appointment of a manager** is **not governed by Section 314(1)**, even if the manager is a relative of a director.
### **What Does "Place of Profit" Mean?**
* A **place of profit** generally refers to a position in a company where a person derives a remuneration (salary, bonus, commission, etc.) above a specified amount and is given a certain amount of responsibility or authority in the company.
* However, the **manager** and **MD** are **excluded** from the definition of "place of profit" in Section 314(1), meaning their appointments are not subject to the restrictions of Section 314(1), even if they are **relatives of directors**.
### **Clarification on ICAI's Suggested Answer:**
* It’s important to note that while the **ICAI** may have discussed the concept in their **suggested answers**, they might have done so in the context of understanding the legal nuances of **"place of profit"**.
* The **manager** is still a person holding a "place of profit," but the specific exemption under Section 314(1) means that **relatives of directors can be appointed as manager** without triggering the restrictions that Section 314(1) would otherwise impose.
### **In Conclusion:**
* The **manager** role is explicitly **exempted from Section 314(1)** of the Companies Act, 1956.
* Therefore, **relatives of directors can be appointed as a manager** in a company without the need for approval or restrictions under Section 314(1).
* While the **manager** is still in a "place of profit" under the broader context of the Act, the section itself **does not impose restrictions** on managerial appointments.
Let me know if you need further clarification!
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