consultancy services from a non-executive director - reg.

[csyogan .]

an unlisted public company intends to pay consultancy fee to a non executive director. can some one kindly suggest as to what compliances need to be ensured

also tell me if s.297, 314 are applicable in such a case

regards,
yogan.

[csyogan .]

sir,

what about s.297

the same exemption doesnt seem to be there in s.297 ??

regards,
yogan.

On Fri, Nov 29, 2013 at 12:54 PM, soma sekhar <marthi_...@yahoo.co.in> wrote:

Dear Mr Yogan

If the non-executive director is paid remuneration as consultancy for the specialised services being extended by him as an expert viz., CS, CA, or a cost accountant or in any other field then the company can do so.  No approvals are required for this.

Marthi 

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[csyogan .]

what about s.297..
would it attract ??

On Fri, Nov 29, 2013 at 11:09 AM, Pooja Vanjani <poojav...@yahoo.co.in> wrote:

 

Hi , 

Section 314 of the CA, 1956 needs to be complied with. 

 

 

Thanks & Regards

 

Pooja

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[c.n. krishnan]

service tax will apply on reverse charge basis

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[CS Ankit Misra]

Section 314 does not attract as it is not a office or place of profit. For further advice, pls clarify the qualification of director and his category.

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regards,

CS ANKIT MISRA

KANPUR

8009968692

 Please do not print this email unless absolutely necessary

[csyogan .]

as per s.314(3), he is getting a remuneration in excess of what he is supposed to be paid.
for a non executive director, sitting fee may be paid..

but in my case, we are paying him monthly consultancy fee

regards,
yogan.

[Muniraju CN]

Is he a professional?

Muniraju  C N

Company Secretary in Practice

No. 41 (New No: 12/41), 10th New Main Road,

25th Main, Kalappa Block,

Srinagar, Bangalore - 560050

Mob: 9986669760

[csyogan .]

no sir..

[CS Ankit Misra]

If that director does not posses any professional qualification, then the same shall be included in the computation of remuneration as per section 309 and provisions of 309(4) shall needs to be complied.

[Manoj Singh Bisht]

Dear Yogan,

 

Since facts are not provided in detail and how the transaction would take place is not known, i am not sure if this would be helpful to you. but i am just trying to put through my observations w.r.t. 309/314 and 299.

 

SUBJECT TO ANYTHING CONTRARY CONTAINED IN THE ARTICLES OF ASSOCIATION OF YOUR COMPANY

 

Section 309(1)(b) - would not be remuneration if service is of professional nature &  Central Govt. is of the opinion that the director possesses the requisite qualification for the practise of the profession. Since in your case, he is not a profession. this would not work for you.

 

Now comes sub section 4 of Section 309 - A non Executive director is eligible for monthly/quarterly or annual payment subject to Central Govt. (Regional Director ) approval. OR commision authorised by Special Resolution. (1 % for MD/WTD/Manager, 3% in other case or % as approved by shareholders + central government.)

 

You can use sub section 4 of section 309 and apply to Central Govt. (Regional Director) and pay monthly/quarterly/ annually if your purpose is to pay remuneration to the non -executive director.

 

Payment in professional capacity if approval is received under section 309(1)(b) would still be subject to Section 314(1) (special resolution of shareholders). Section 314 is a very tricky section and the opinion depends on case to case basis.

 

Section 299 would be attracted in case of payment in professional capacity under section 309(1)(b)/314.

 

I would recommend you to follow Section 309(4) if you wish to pay remuneration. and if the services are actually of professional nature and the motive is actually to pay for the professional services provided by him, comply with 309(1)(b).  As far as 314 is concerned, if you can provide the exact details of professional service, turnover etc we can determine whether he is using the post of directorship for profit. For authorities, in most of the cases, the misuse of office or place of profit is easy to prove against the director. therefore, request you to take shareholders approval under section 314(1) if you wish to go for 309(1)(b) as stated above.

 

I would still request you to share the exact details of the case alongwith details of turnover/ profit /salary of MD/WTD etc so that we can assess the percentage of fee paid based on turnover/profit and an opinion can be formed whether he is using the post of directorship for acquiring the professional fee and whether it would come under the purview of Section 314. But it would be better and on a safer side to take shareholders approval under Section 314 also.

 

Thank you

 

Regards

Manoj

[Deepesh Nayak]

Very nice Manoj Sir.

Regards,
Deepesh

Thanking you,

*CS Deepesh Kumar Nayak*
 Company Secretary
 *Mob. 097134-80215*
*csdeepe...@gmail.com*