Section 314

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

21 November 2012 Kindly explain section 314 in simple language.

Meaning of office or place of profit?

Limits prescribed?

Thanks

Ajay Mishra

Ajay Mishra (Expert)
Follow

21 November 2012 Hi

As per section 314(3), a director is said to be holding 'Office or Place of Profit' in a company, if he obtains from the company in addition to the remuneration to which he is entitled as a director any salary, fees, commission or any other perquisites while holding the office of a director.

An individual other than a director or any firm, private company or body corporate is said to be holding office or place of profit in a company, if they obtain from the company, by way of remuneration, any salary, fees, commission or any other perquisites while holding the office or place of profit in the company.
As per section 314 certain persons cannot be appointed or allow to hold an office or place of profit in the company unless, they comply with the requirement of the provisions of this section. If any person is proposed to hold such office or place of profit in the company then company has to take consent of the shareholders by passing special resolution in the general meeting of the company.
No such consent is required, if a director receiving remuneration by holding such office or place in subsidiary of the company returned such remuneration to the subsidiary or its holding company.

Ajay Mishra

Ajay Mishra (Expert)
Follow

21 November 2012 Hi

As per amendment made on 02.05.2011 by MCA on issue of Notification the limit increased upto Rs. 250000 p.m. from Rs. 50000 p.m..

Ajay Mishra

Ajay Mishra (Expert)
Follow

21 November 2012 NEW RULES ON DIRECTOR’S RELATIVE (OFFICE OR PLACE OF PROFIT) RULES, 2011
The MCA has issued a Notification No. G.S.R. 357(E) dated 02.05.2011: In exercise of the power conferred by clause (b) of sub-section (1) of Section 642, read with sub-section (1B) of section 314 of the Companies Act, 1956, the Central Government hereby makes the following Rules in supersession of the earlier Notification No. 89(E) dates 05.02.2003,namely:-
1. Short Title and Commencement:
(1) These rules may be called Director’s Relative (Office or Place of Profit) Rules, 2011.
(2) They shall come into force on the sate of their publication in the official gazette.
2. Applicability:
These rules shall apply to all companies registered under the Companies Act, 1956 except as provided in these rules.
3. Approval of the Central Government in case of Appointment of Relatives, etc. of Directors: No appointment for an office, or place of profit in a company shall take effect unless approved by the Central Government on an application, in respect of :-
(a) Partner of firm or relative of a Director or Manager, or
(b) Firm in which such Director, or Manager or relative of either is a partner; or
(c) Private company of which such Director, or Member or relative of either is a Director or member, which carries a monthly remuneration exceeding, Rs. 2,50,000 p.m.
(c ) An individual who is a relative of a director, or Manager and is appointed as an Advisor or Consultant and paid remuneration including commission on periodical basis.
4. Selection of Relatives of Directors and Directors and Directors to Hold a Place of Office/Profit:-
(a) The selection and appointment of a relative of a Director for holding office or place of profit in the company with the salary exceeding Rs. 250000 p.m. shall be approved by adopting the same procedure applicable to non-relatives and approved by Selection Committee.
Explanation: For the purpose of the sub-rule, in the case of listed public companies, the expression “Selection Committee” means a committee, consisting of at least three members, the majority of which shall be independent director and an outside expert.
Provided that in case of unlisted companies, Independent director are not necessary but outside expert should be their in the Selection Committee.
Provided further that in the case of private companies, Selection Committee is not necessary.
5. Procedure for Examination of Application: The application under rule 3 shall be examined with respect to the following, in addition to all other requirements under the Companies Act, 1956, 1956:-
(a) In the case of Individual appointee, an undertaking from him that he/she will be in exclusive employment of the company and will not hold a place of profit in any other company.
(b) The monitory value of all allowances and perquisites and of total remuneration package (monthly/annually) proposed to be paid to the appointee and details of the services that will be rendered by him to the company.
(c) Details of shareholding pattern particularly the shareholding of the directors along with his/her/their relatives, the public holding, the institutional holding (each institution separately) and the quantum of dividend paid by the company during the last three preceding financial years.
(d) Details of educational qualification/experience, pay scale, allowances and other benefits of similarly placed executives.
(e) In case of the appointment of a relative, an undertaking from the Director/Secretary of the Company that the similarly placed employees are getting the comparable salary.
(f) List and particulars of the employees who are in receipt of remuneration of Rs. 250000 or more per month.
(g) The total number of relatives of all the Directors either appointed as Manager/Whole time Director, Manager or in any other position in the company, the total remuneration paid to all of them all together as a percentage of profit as calculated for the purpose of section 198 of the Companies Act, 1956.

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now

Join the CA Students WhatsApp Community for ICAI Updates, Trending Courses & Notes!

Similar Resolved Queries

Unanswered Queries

Popular
Recent

Trending Online Classes

Direct Tax Laws & International Taxation May 26,Sept 26 & Jan 27

CA Arvind Tuli

Enroll Now
Audit Fast Track Recorded Batch For May 26,Sept 26 & Jan 27

CA Aarti Lahoti

Enroll Now
DT & Audit (Exam Oriented Fastrack Batch) - For May 26 Exams and onwards Full English

CA Bhanwar Borana & CA Shubham Keswani

Enroll Now

view all classess

Meet our CAclubindia PRO Members

Shubham Jain

Sivanath VV

Raviraj ponkshe

SANJAY GAIROLA

Aayesha mulani

Subscribe Now

Section 314

Similar Resolved Queries

Trending Online Classes

Meet our CAclubindia PRO Members

Quick Links

Browse by Category

Latest Job Openings

Senior Executive

Manager- Finance and Compliance

GST CONSULTANT

GST CONSULTANCY

Accountant

CA Final

Article Assistant

Associate CA