Remuneration to non executive director

Please tell the status of the company. Si it public or private co.

Strict provisions relating to remuneration are not applicable to a private company. So if your co. is a pvt. company then CG approval is not required. Also check your AOA in this regard.

Best Regards

Ya its public co(listed)

'NON-EXECUTIVE DIRECTOR'

Ceiling on remuneration of ordinary or non-executive directors

Sections 309(4) and 309(7) deals with remuneration payable to the part time directors, that is to say the directors who are neither in the whole-time employment of the company nor a managing director, within the overall limit stipulated in section 198(1) and further in section 309(4) itself.

Section 309(4) authorises payment of remuneration to part time directors in two alternative ways:—

(i) by way of monthly, quarterly or annual payment with the approval of the Central Government; and/or

(ii) by way of commission without the approval of the Central Government, subject to the approval of the members by way of special resolution.

Therefore, if the commission payable exceeds the limit, payment can be made only with the approval of the Central Government.

Quantum of commission that may be paid to non-executive directors

Section 309(4) provides that a director or directors who is/are not managing or whole-time directors may be paid remuneration periodically with the approval of the Central Government or may be paid commission, provided the said remuneration shall not exceed 1% of the net profits if the company has a managing or whole-time director and 3% in other cases. The net profits shall be computed in terms of sections 198, 349 and 350 of the Act.

Commission may be paid to all non-executive directors

At the time of initiating the payment of commission to non-executive directors, subject to necessary approvals, the Board may decide that the same shall be shared equally by and amongst all such directors or in any other way as may be approved by the Board or as prescribed in the Articles.

Prior approval of the members

Besides the approval of the Central Government, no payment to non-executive directors without the prior approval of the company in general meeting accorded by a special resolution in terms of section 309(4) can be made.

Articles must provide for remuneration to non-executive directors

If there is no provision in the articles for payment of remuneration to non-executive directors, action shall first be taken to amend the provisions of articles to include a suitable provision by way of a special resolution at a general meeting.

Also find enclosed herewith a very useful file dealing with Managerial Remuneration.

Also check the link below for your knowledge:

RESOLUTION FO INCREASE IN MANAGERIAL REMUNERATION

Very informative Sir..... Thankyou...

Dear Mr. Garg,

In case of a Private Limited Company, as stated by you no CG approval is required. If AOA of pvt. co. provides for such type of payments to Non-Executive Directors, what proceedure is to be followed. If not provided in the AOA, than what proceedure is to be followed. Please also enlighten on this issue.

Thanks

If AOA of pvt. co. provides for such type of payments to Non-Executive Directors, what proceedure is to be followed.

Answer:== Simply pass a board resolution for payment to NED.

If not provided in the AOA, than what proceedure is to be followed. Please also enlighten on this issue.

Answer:== First amend your AOA suitably to allow the payment to NED and Simply pass a board resolution for payment to NED.

Keep it ankur great going

What is the difference between Executive Director and Non-Executive Director? I think, part time directors are called Non-Executive Directors and whole time directors are called Executive Directors. Both type of directors are getting salary / remuneration from the pvt. limited company. Is my understanding correct. Please clarify this point. Thanks 

Hello Ankur Sir,

What if Comapny is having inadequate profits and already paying a WTD more then the limits prescribed under schedule XIII and having passed the Special Resolution for that.

Can such Comany Pay its NED regular remuneration ?

if yes is there any limit.. plz reply.. 

Can anyone explain:-

if a Company is Public Limited Co.  having one Managing Director and the Company is having inadequate profits but paying the Remuneration to the Nonexecutive Director of the Company. Then, what is the escape situation so that company may not violate the provisions of Comapnies Act, 1956