Every Listed Company or a Public Company having paid up capital of Rs.10 Crore or more is required to appoint either a Whole Time Director or Managing Director.
Now the question may arise that whether a Whole Time Director can be appointed without any remuneration in the organization.
Section 197 of the Companies Act 2013 has prescribed the maximum managerial remuneration can be paid to a Whole Time Director and Managing Director and that is Five percent of the net profit and if there is more than one such Director then the limit is ten percent . Further if there is inadequate profit then such remuneration shall be payable as per provisions of schedule V.
However there is no provision is available in the Companies Act 2013 in relation to minimum remuneration payable to the whole time Director / Managing Director.
So if any person wants to appoint as a Whole time Director in a company without remuneration there is no bar and he can continue with the same.
In normal practice the company appointing a person as a whole time director enters with a contract, which contains his terms and condition and remuneration.
There is a problem in the Contract Act 1872, as per provision of Section 25 of the Contract Act any agreement without consideration is not enforceable in the law.
Therefore Company enters into an agreement with zero consideration then it will not be enforceable and the whole purpose of the agreement shall be defeated.
The Contract Act talks about the consideration but no where in the act has been stated that the consideration must be adequate, if the other part has accepted any amount of consideration then it will be a valid.
So as per my view if any person is appointed by a company as a whole time director with a remuneration of Rs.1/- and enter into an agreement then it will be a valid agreement.
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