limit on Director salary in Private Limited Company

Scope of the term 'Office or Place of Profit' in a company:

The section 314 regulates all such kinds of office or place of profit where any of the persons mentioned therein is required to perform functions on behalf of a company under the control, direction and supervision of the company. In general, there should be employer-employee relationship or that of principal-agent. The person appointed to the office should be required to render duties, services and functions under the instructions of the company concerned. Accordingly, just because some remuneration like fees or other sums are received from the company, will not make such transactions fall under the prohibition under the section.

The words 'office or place of profit' occurring in section 314(1) include selling and buying agents receiving commission and/or salary. [CIT v Principal Officer C/o Arkay Wires (P.) Ltd. (2005) 58 SCL 97 (All.)].

The DCA has given clarification vide Circular No. 14 of 1975, dated 5-6-1975 to clarify various doubts on the scope of the provisions of section 314(1B) of Companies Act, 1956, as under:— Section 314 of the Companies Act, 1956, applies to public as well as private companies. Sub-section (1) of this section provides that no director of the company and no partner or relative of such director shall hold any office or place of profit, except, that of managing director or manager, banker or trustee for the holders of debentures of the company, carrying a total monthly remuneration of Rs. 500 or more, under the company unless a special resolution according the consent of the company is passed at the general meeting of the company held for the first time after the holding of such office or place of profit. The new sub-section (1B) says that notwithstanding anything contained in the aforesaid sub-section (1), no such office or place of profit carrying a monthly remuneration of not less than Rs. 3,000 shall be held except with the prior consent of the company by a special resolution and the approval of the Central Government. The proviso to the sub-section (1B) provides that in the case of an appointment to such office of profit having been made prior to the coming into force of the Companies (Amendment) Act, 1974, the approval of the company in general meeting and of the Central Government for holding by such person of the office of profit shall be obtained within a period of six months from the commencement of the Companies (Amendment) Act, 1974.

Dear Sir,

 Pleae let me clear can a diredtor cum share holder in public limited company take salary , if yes than please what is maximum limit of draw the salary ?

A managerial director who is not holding share up to Rs. 5 lakhs or more and director of the company is not related to any promoter during the period of two years prior to his appointment as a managerial person, so in this case, the company may pay to him 2.5% of the current relevant profits and up to 5% with the approval of shareholders by a special resolution.