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M Verghese (CA Student)     19 September 2007

Sec 314

Mr.X a director of ABC Ltd. has also been appointed as a manager for a monthly remuneration of Rs.20,000. Does this appointment attract the provisions of Section 314?

What is the situation in case X is appointed as a manager in the subsidiary of ABC Ltd?



 14 Replies

Abhaysharma

Abhaysharma (CS)     19 September 2007

Mr. X, being a director of ABC Ltd, can be the Manager/Managing Director of ABC Ltd or a subsidiary thereof. No doubt it is an office of profit but he can be so appointed without the consent of members by a special resolution. The quantum of remuneration is irrelevant for such an office of profit. Of course, the remuneration will be guided by the relevant provisions of the Companies Act but it has nothing to do with section 314 for such an office. However, in case he is a manager of a subsidiary of ABC Ltd, the remuneration recieved in respect of such an office should be paid over to ABC Ltd or its holding company otherwise special resolution will be required. purpose of Mr. X and irrespective of the quantum of remuneration but subject to the provisions
M Verghese

M Verghese (CA Student)     19 September 2007

Thanks!
Guest
(Guest)
sec 314(1) covers if directors holding place of profit(even Rs>=1) but as he is appointed as manager is an exception to it. no section wl not attract in subsidiary also.
Srinath A. N.

Srinath A. N. (Officer - Legal)     11 October 2007

Section 314 is not applicable to appointment of Director as Managing Director, Manager (under Sec.314(1) and Whole Time Director (Under notification). Therefore Section 314 will not attract for appointment of MD, Manager or WTD. Except above said cases, the Section applicable as follows for the place of profit detailed below: (1) Monthly Remuneration upto Rs.10,000 - Prior Board approval (2) Monthly Remuneration from Rs.10,000 to 20,000 - Board & Members approval (3) Monthly Remuneration from Rs.20,000 to 50,000 - prior approval of Board and Members (4) Monthly Remuneration over and above 50,000 - Prior approval of Board, Members and Central Government.
Guest
(Guest)
As per sub-section (3) of section 314, a director is said to be holding office or place of profit if he is entitled to receive anything from the company or subsidiary company, in addition to his entitlement as director i.e. remuneration under section 309(2) and 309(4). Therefore, in the given case, in both the situations, provisions of section 314 are attracted. For any further clarification write to me on tayalsir @ rediffmail.com
Srinath A. N.

Srinath A. N. (Officer - Legal)     17 October 2007

Section 314(1) specifically given exemption from applicability of Section 314 for appointment of Director as manager in the Company or in the subsidiary company.
Kirthi Priya

Kirthi Priya (CA Final Student)     24 February 2008

Section 314(1) specifically gives exemption from applicability of Section 314 for appointment of Director as manager in the Company or in the subsidiary company.
Yogesh Bhatt

Yogesh Bhatt (Company Secretary)     01 July 2010

Thanks.

Deepak Maharishi

Deepak Maharishi (CS)     02 July 2010

Following are my views over Section 314 which would be of your help:

 

1. This section is applicable to both public  and private companies.

 

2. Categories which are mentioned in 314(1) are :

a)      Director

b)      Relative of Director

c)      Firm in which Director is a partner

d)      Firm in which relative of Director is a partner

e)     Private Company in which Director is Director

f)      Private Company in which Director is member

g)     any director or manager of such private company.

 

3. There should be an employer - employee relationship for the person so appointed.


4. This will include selling / buying agents receiving salary or commission from the company.


5. Exception to the section 314(1) are :

a)      Managing Director

b)      Manager

c)      Banker

d)     Trustee of Debentures

 

6. Section 314(1) requires prior consent of the company by a special resolution, however, there is a provision to the said section which states that special resolution passed in the general meeting held for the first time after such appointment is made is also sufficient.

 

7.  Also, consider the following examples:


     a) Director holds place of profit     -    Special Resolution is required

    b)  Other categories hold place of profit but with less than Rs. 10k-   - Special Resolution not            required

    c) Other categories hold office or place of profit with more than Rs. 10k   - Special Resolution required.

 

8. Another provision which is quite clear by the language itself states that relative or firm in which relative is partner is appointed without the knowledge of director, then, approval may be taken maximum within 3 months.

 

9. Section 314(1A) - states that nothing which is described in 314(1) is applicable where relative of director or firm in which relative is partner holds place of profit in company or its subsidiary before such director becomes director of the company.

 

10. Section 314(1B) - states that notwithstanding anything contained in 314(1), prior approval of  Central Government is required if the following parties hold office or place of profit in the company or in its subsidiary for remuneration more than Rs. 50,000 per month:

 

a)      Relative of Director / manager

b)      Firm in which director / manager or relative of director / manager is partner

c)     Any other partner of a firm in which director / manager or relative is a partner

d)      Private Company in which director / manager is a director

e)       Private company in which director / manger is a member

f)      Private company in which relative of director / manager  is a director

g)      Private Company in which relative of director / manager is a member

 

10. Please note that THERE ARE NO EXCEPTIONS TO SECTION 314(1B) LIKE THOSE MENTIONED IN 314(1)   {Managing Director, Manager, Banker, Trustee).

 

11. Last but not the least - Whether or not Director receives salary or not, whenever relative is appointed to office or place of profit, one will have to comply with Section 314 of the Companies Act.

 

 Thanks and regards

 

Deepak Maharishi

Kanika Gupta

Kanika Gupta (C.S Trainee)     25 November 2011

If an employee of a subsidiary company is also appointed as a Director in another subsidiary company would it attract the provisions of Section 314 of the Companies ACt,156?

Smriti Dhawan

Smriti Dhawan (Company Secretary )     26 November 2011

 

Section 314 of Companies Act will not be applicable if Employee of subsidiary is appointed as Director of another subsidiary company . 

Section 314 applies only to the Director’s or Manager’s relatives or Partners or Firms in which Director / Manager is a Partner or a Private Company in which Director is a Director or Member.

Section 314(1B),will be applicable only  if the holder of the office is any of the following persons:-

  (a)  Any relative of a director of the Company.

  (b)  Any relative of the Manager of the Company.

  (c)  Any partner of a firm in which a director of the company is a partner.

  (d)  Any partner of a firm in which the manager of the company is a partner.

  (e)  Any firm in which a director of the company is a partner.

   (f)  Any firm in which the manager of the company is a partner.

  (g)  Any firm in which a relative of a director of the company is a partner.

  (h)  Any firm in which a relative of the manager of the company is a partner.

   (i)  Any private company of which a director of the company is a director.

   (j)  Any private company of which a director of the company is a member.

  (k)  Any private company of which the manager of the company is a director.

   (l)  Any private company of which the manager of the company is a member.

  (m)  Any private company of which any relative of a director of the company is a director.

  (n)  Any private company of which any relative of a director of the company is a member.

  (o)  Any private company of which any relative of the manger of the company is a director

 

 

 

CS Ankur Srivastava

CS Ankur Srivastava (Company Secretary & Compliance Officer)     26 November 2011

No, it would not attract the provisions of Section 314.

Karan

Karan (Job)     09 November 2012

Hi,

Please help me in solving these situations below:

1) Son of a director of ABC ltd is proposed to be appointed as MD of the company on monthy remuneration of 75000 per month.

2) Daughter of another director of ABC ltd is proposed to be appointed as Accounts Manager of salary of 60000 per month.

3) Brother of another director of ABC ltd is proposed to be appointed as Purchase Manager in XYZ ltd which is a subsidiary of ABC ltd.

 

Please expain the relevant provisions applicable for the above three cases.

 

Regards,

Karan

Karan

Karan (Job)     09 November 2012

Sorry I forgot to mention the monthly remuneration of 60000 in the last question.

 

Please help.


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