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Sitting fee

sindhusha (semi qualified cs) (25 Points)

18 July 2012

who are the directors eligible for sitting fee? does managing director eligible for sittin fee?

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10 Replies

(Guest)

All directors are eligible for sitting fees including MD.

CS Mitesh Mehta (Company Secretary) (17139 Points)
Replied 19 July 2012

A director who is not a managing director or whole-time director may be paid sitting fees.

(Guest)

Section 309 (2) says directors can be paid sitting fees. It does not exclude MD / WTD from the purview of payment of sitting fees.

CS Smriti Sharma (ACS, B Samrish & Co.) (880 Points)
Replied 19 July 2012

I agree with Neha that managing director can be paid sitting fees for attending board meetings of the company.So would be also the case of other directors.

To ascertain it legally one needs to go though provisions contained in section 309 of the Companies Act, 1956 read with 198 of the said Act.

Please see below link which throws light on the subject:

https://corporatelawcorpus.blogspot.in/2010/03/payment-of-sitting-fees-to-managing.html

CS Mitesh Mehta (Company Secretary) (17139 Points)
Replied 19 July 2012

Non-Executive Directors are the members of the Board not involving in day-to-day operations of the Company.

Against the services rendered by NEDs, the Company makes compensation by way of sitting fees.

While Executive directors are paid Compensation by way of salary, perquisite, commission etc. for their involvement in day to day operation. It is the duty of MD/WTD to attend the meeting for which he is not entitled for any sitting fees.

(Guest)

Originally posted by : mitesh
	Against the services rendered by NEDs, the Company makes compensation by way of sitting fees.

NED are not getting sitting fees as compensation for rendering services. Rather sitting fees can be paid to all the directors irrespective of the fact whether they are MD or ordinary director for the purpose of attending the meeting of board; generally it is paid to outstation directors incl MD/ WTD.

Regards,

Neha Jain

(Guest)

The very fact that sub-section (2) of Section 309 very clearly talks of “remuneration by way of a fee for each meeting of the board or a committee thereof attended by him” (by the director) gives rise to a necessary implication that sitting fees would amount to remuneration under provisions of Section 309. Further, in view of sub-section (2) of Section 198, which reads as follows: “The percentage aforesaid shall be exclusive of any fees payable to directors under sub-section (2) of Section 309.” It cannot be said that sitting fee would not amount to remuneration for purposes of Section 309 of the Companies Act, 1956.

In view of this legal position, a Managing Director can be paid sitting fees for attending board meetings of the company.

Parashar (Company Secretary 2004) (1013 Points)
Replied 19 July 2012

Check your Articles of association also, what do they contain for this clause.

CA BHARATH KUMAR (PARTNER) (2604 Points)
Replied 19 July 2012

Section 309 (2) says directors can be paid sitting fees.

(Guest)

As per DCA if you want to pay sitting fee to the EDs like MD then you may pay but that would be counted for the purpose of calculating the overall managerial remuneration limit.