Mr. A is a managing director and Mr. B a whole time director in a XYZ Pvt Ltd Company, both are getting remuneration as such MD and WTD.
Now both are being appointed in PQR Pvt Ltd as Whole time director on monthly remuneration. PQR is wholly owned Subsidiary of XYZ.
pls reply on followings:
1. Will this require approval of shareholders U/s 314.
2. The receipt of remuneration as WTD in PQR Subsidiary will be a place of profit ?
3. Further, in case Mr. A and Mr. B stops taking remuneration from XYZ Holding Company and starts taking remuneration only from PQR subsidiary, what would be the status for 314.
Kindly mention the proposed remuneration of Mr. A and Mr. B in PQR Limited to suggest something as section 314 is Limit based section.
Thanks
Guest
Remuneration would be around 3 lacs per month, not yet freezed.
however in case of directors, themselves being in place of profit, remuneration amount has no relevance u/s 314.
thanks
In your case section 314(1B) may be applicable due to the following reasons:
1. Section 314 is applicable to both public and private companies.
2. Proposed remuneration is more than the limits specified by section 314(1B).
3. As your company a private company hence provisions of section 269 will not be applicable to appoint WTD. (It has been clarified by DCA that the approval of the Central Government once again, under section 314(1B) will not be necessary in the cases where the Central Government's approval has already been taken under sections 198, 269, 309, 310 and 311, as the case may be.)
4. Exemption under section 314(1) which is available to MD is not available where section 314(1B) is applicable to the case.
In the case of a private company (not governed by section 269, etc. of the Companies Act, 1956) appointment of a person as a managing director who is related to a director of the company will attract the provisions of section 314(1B) where the remuneration payable to such managing director is in excess of the limit envisaged in sub-section (1B).
As far as limits along with the exception in respect of an appointment of managing director or manager is not considered relevant because sub-section (1B) expressly overrides sub-section (1) and call for the exercise of a greater vigilance where the remuneration proposed is Rs. 20,000 per month and more.
Conclusion: As per the discussion above we may conclude that provisions of subsidiary which are mentioned in section 314(1) are overruled by section 314(1B) or in other words subsidiary status is not the criteria.
So check the relationship status of directors as mentioned in section 314(1B) in your case. If on the basis relationship status section 314(1B) is applicable then you have to obtain prior approval of shareholders and apply to CG for its approval.
Best Regards
Guest
314 (1B) is limited in role and apply only in case of (a) partner or relative (b) a firm and (c) a pvt company, it do not include case of Director holding place of profit, which is coverd in 314 (1) (a) only.
As you have mentioned (1B) is not applicable to your case…then applicability of section 314(1)(a) is confirmed according to me. Take approval of shareholders through special resolution [may be post SR approval read with proviso to 314(1)].
(1) My company is planning to appoint its CFO as the alternate director to one of our foreign director. While doing so, will it attract the provisions of Sec 314(1) or Section 314(1B). The remuneration of the CFO exceeds the limits prescribed (of monthly remuneration greater than Rs 2,50,000/-)as per the latest notification to this Section.
(2) Say if we are not appointing him as the Alternate director, do we still need to give disclosures of his remuneration in the Director's Report as per the General Circular No. 23/2011 dated 03.05.2011, if the remuneration exceeds the limits prescribed in the said circular.
Please guide me..as this is urgent
Swati Baidya
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