Section 314(1B) clarification

Muralidharan (Self Employed) (1034 Points)

28 June 2011  

28th June 2011
 
Preamble of the Issue
 
Mr.X is a Director of the Company XYZ Private Limited
Mr.Y is a relative of Mr.X
 
Mr.Y who is a relative of Mr.X (Director of the Company) is being engaged as a consultant on a monthly payment of Rs.50000/-. The provisions of Section 314(1B) is attracted for the above said appointment of Mr.Y as consultant. In my opinion this requires the following approval:
 
(1) Board of Directors prior approval.
(2) PRIOR approval of the Members of the Company by way of Special Resolution [Section 314(1B)]
(Note : Central Govt. approval is not required since the payment does not cross Rs.50000/-)
 
My interpretation of Section 314 is as follows:
 
(1) Monthly Remuneration upto Rs.9,999/- Prior Board approval

(2) Monthly Remuneration from Rs.10,000/- to Rs.19,999/- Prior Board Approval and Members approval at the next General Meeting

(3) Monthly Remuneration from Rs.20,000/- to Rs.50,000/- Prior approval of the Board and Prior approval of the Members

(4) Monthly Remuneration over and above Rs.50,000 - Prior approval of Board, Prior approval of the Members and Central Government.

The above appointment falls under Point No.3 of my interpretation. Kindly advise in this regard.

with regards

Murali