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Nitesh Matta (Nothing)     15 September 2013

Appointment of the relative of director in pvt company

M/s Akin Consultants Private Ltd. seeks your legal advice regarding the following appointments
relating to directors and their relatives:
(i) Mr. K, who is a relative of one of the directors, is to be appointed as the managing director
on a monthly salary of `80,000 plus other perquisites as applicable to other executives of
the company.
(ii) Miss N, a relative of a director, is to be appointed as Chief Public Relations Officer on a
salary of `65,000 per month.
(iii)Mr. W, a relative of a director, is to be appointed as Chief Executive Officer on a
consolidated salary of `2,55,000 per month.
Advise explaining the relevant provisions of the Companies Act, 1956.


 7 Replies

CA CHINTAN A THAKKAR

CA CHINTAN A THAKKAR (Chartered Accountant)     16 September 2013

It is a pvt ltd co. So prvosion of sec 198, 349 etc ll nt b applicable. So no lmit on remuneration.
Nitesh Matta

Nitesh Matta (Nothing)     16 September 2013

and what about the appoitnment?? max limit is 15 na?? and why have they given the AGM dates in Bracket?

Sneha

Sneha (Company Secretary)     16 September 2013

If a relative of director is appointed at office or place of profit then applicable section is 314. If the monthly remuneration is Rs. 50000 or more then special resolution is required. If its more than Rs. 250000 p.m then C.G approval is required

Swapnil Sharma

Swapnil Sharma (Education)     21 September 2013

Are you doing ICMAT project for CMA final?

Sarvesh

Sarvesh (Company Secretary)     25 September 2013

Yes provisions of section 314 will apply in (ii) and (iii) case.

Swapnil Sharma

Swapnil Sharma (Education)     29 September 2013

As per provisions of sec. 314(1) of the Companies Act, 1956, except with the consent of the company accorded by way of special resolution, no director or relative of a director shall hold any office or place of profit under the company except that of managing director or manager of the company.

Further as per provisions of sec. 314(1B) of the Companies Act, 1956 , no relative of a director can be appointed to any office or place of profit under the company which carries a monthly remuneration of not less than Rs.250000/- except with the prior consent by way of special resolution and the approval of the central government. 

Swapnil Sharma

Swapnil Sharma (Education)     29 September 2013

Thus in the given case:

i)             Mr. K, who is a relative of one of the directors, is to be appointed as the managing director, the provisions of sec. 314(1) are not attracted even though he is a relative of a director. This is because the appointment of Managing Director or Manager is outside the provisions of sec. 314 of the Companies Act, 1956. Thus no special resolution is required in this case.

ii)                  Since the remuneration proposed to be paid to Miss N does not exceed Rs. 250000/- per month, her appointment does not require the passing of special resolution by the company and also the approval of the central government is not required. However, as the proposed remuneration exceeds Rs. 50000/- her appointment shall require the passing of special resolution by the company. The special resolution is to be passed by the company at general meeting held for the first time after such appointment.

iii)               In case of Mr. W his monthly remuneration exceeds Rs. 250000/- and as he is relative of director his appointment would require prior passing of special resolution and prior central government approval.


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