[CSMysore] Remuneration to NRI Director

[Mridula .P.Thomas]

Dear All,

Can anyone please tell me whether any restriction is there for a pvt. Ltd. Company to pay remuneration to an NRI Director who is not working for the Company and who make only private visits to India.


Thank You
Mridula P Thomas
Company Secretary

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[Mridula .P.Thomas]

[Mridula .P.Thomas]

[naren bhagat]

Compnany cannot pay anything or everthing to  Directors or Managerial Personnel as remuneration as there are certain limits specified in Schedule XIII, 

For  more details look into Sections 198, 309 and related case laws

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With Regards.
    nagu

[Vivek Hegde]

Dear Ms Mridula

RBI has granted general permission for payment of remuneration in Indian rupees to non-resident non-whole time directors while they are on visit to India for company's work i.e for attending board meeting, towards sitting fees, compensation, remuneration etc...however this permission is subject to condition that the co. has obtained necessary approvals from the central govt. u/s 309 or 310...Off course these sections are not applicable to your Company.

Further application for remittance of saving on account of payment of sitting fees on form no.A2 is also to be made to authorised dealer accompanied with certificate of proof of payment of remuneration to facilitate its payment without RBI's approval.

Vivek

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CS Vivek Hegde,B.com, ACS, CWA
Company Secretary in Practice
No. 405, 4th Block, 7th Cross
Koramangala, Bangalore-560034
Mob: 9019756940

[Mridula .P.Thomas]

Dear Mr. Vivek,

Thanks for your advice.

In our case, Director is not making any visit to India for Company's work. So RBI's general permission for payment of remuneration won't be applicable in this situation, right.

In Form No:A2, this transaction will fall under which purpose code?....and company is not giving any sitting fees to this Director .

Pls clarify.

Best Regards,
Mridula

[Vivek Hegde]

Dear Mridhula

Quoting the relevant circular.....


By its Notification No.FERA 128/93-RB dated 29th March 1993, Reserve Bank has granted general permission under Section 9(1)(a) of FERA 1973 to companies in India for making payments in Indian rupees to their non-resident (including foreign nationals) non-wholetime directors while on a visit to India for the company's work such as attending Board meeting etc., towards sitting fees, commission or remuneration by way of monthly or quarterly or annual payment in accordance with the provisions contained in the Company's Memorandum of Association or Articles of Association or in any agreement entered into by it or in any resolution passed by the company in general meeting or by its Board of Directors. This general permission is, however, subject to the condition that the company has obtained the necessary approval from the Central Government under Section 309(4) or Section 310 of the Companies Act, 1956 wherever it applies.

 (ii) Applications for remittances of savings, if any, out of sitting fees paid to the non-resident

directors by the Indian companies concerned for actual attendance in Board meetings should be made to authorised dealers on form A2 together with a certificate issued by the company concerned confirming payment of sitting fees. Authorised dealers may allow such remittances without reference to Reserve Bank on verification of the company's certificate regarding payment of the sitting fees. 

(iii) Applications for remittances on account of payment of commission, remuneration, etc.

to the non-resident directors should be made by the Indian companies concerned to authorised dealers on form A2 together with a certified copy of the audited balance sheet of the company and a work sheet duly certified by a Chartered Accountant indicating how the remittable amount has been arrived at. Applicant's undertaking/Accountant's certificate regarding payment of income-tax in the prescribed form should also be submitted (cf paragraph 3B.10). Authorised dealers may allow remittances of net commission/remuneration after satisfying about the correctness of the amount and verification of the terms of appointment of the director.

So as per plain reading of the provisions unless the Director visit India for Company' work we can not pay remuneration etc.....

Vivek