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Are the directors entitled to remuneration? Can

such remuneration be waived?

The remuneration payable to the directors must be determined according to the provisions of Sections 198 and 309 either by the Articles or by the resolution of a

company.

Rules regarding director’s remuneration ace summed up below.

1. The remuneration payable to the directors of a Company shall be determined

cither by the articles, or by a resolution passed in a general meeting of the

members. The articles may require the resolution to be a special resolution.—Sec.

309(1).

2. If a director gives professional service to the company, he may be paid for it.

Provided that, in the opinion of the Central Government, he has requisite qualifications

for the profession.

3. The remuneration of directors is part of the overall managerial remuneration which,

according to Section 198. Cannot exceed 11% of the net profits. When profit is

inadequate or company is. loss a managerial person is entitled to a minimum

remuneration. The ceiling of minimum remuneration has been prescribed in Part II of 

Schedule XIIL the minimum remuneration in terms of 'effective capital* of the '

company. Minimum remuneration will be Rs. 40.000 up to effective capital Rs. I crore,

Rs. 57,000 between Rs. I and Rs. 5 crores effective capital. Rs. 72.000 between 5 to 15

crores and maximum remuneration will be Rs. 87.000 when effective capital is more than

Rs. 15 crores.

4. A director may receive remuneration either by way of a monthly payment, or by

way of a fee for each meeting of the board, or a Committee thereof attended by him. or 

 partly by the one way and partly by the other. -Sec. 309(2).

5. A director, who is either in the whole-time employment of the company or a

Managing Director, may be paid remuneration either by way of a monthly payment or at

a specified percentage of the net profits of the company or partly by one way and partly

 by the other. But, except - with the approval of the Central Government, such

remuneration shall not exceed 5% of the net profits for one such director, and if there is

more than one such director. 10% for all of them together.—Sec. 309(3).

6. Directors (who are not in the whole time employment if  the company and not a

Managing Director) may be allowed a monthly, quarterly or annually sum with the

approval of the Central Government or a commission on net profits (if sanctioned by a

special resolution). Such commission shall not exceed for all die directors together (i) J

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% of the net "profits of the company, if the company has a managing or whole-time

director, or a manager, and (ii) 3% of the net profits of the company, in any other case.

Commission, in excess of these’ rates. may be allowed with the approval of the Central

Government if so resolved in a general meeting of the company. - Sec. 309(4).

7. The net profits arc to be calculated in the manner laid down in Section 198(1).—Sec.309(5).

8. Remuneration drawn in excess of what is allowable, must be refunded to the

company and. till so refunded must be held in trust for the company.—Sec. 309(5A).

The company cannot waive recovery of such sums.—Sec. 309(5B).

9. A whole-time director or a Managing Director who receives a commission from a

Company is not entitled to receive any commission or remuneration from any subsidiary

of the Company.—Sec.309 (6).

10. The rules stated above do not apply to private Companies unless they are subsidiary

of public Companies.—Sec. 309(9).

11. Any provision relating to the remuneration of directors or managing directors or an

amendment thereof, whereby such remuneration is increased, will riot be valid unless

sanctioned by the Central Government. But the director’s fee. For attending a meeting of 

the Board or? Committee can he increased up to Rs. 250 without Government sanction.

When paid up capital of the Company is not more than Rs. 50 lakhs Rs. 500 between Rs.

50 lakhs to Rs. 5 awes paid up capital Rt. 750 between Rs. 5 chores and f&. 10 crores

and Rs. 1.000 in case of more than Rs. 15 crores paid up capital.

12. Legal decisions:

a) The remuneration "payable to directors is a debt for which a director may

sue the Company. Orton V. Cleveland etc. Co.K ioch remuneration may be

 paid out of capital if there no profits.

 b) Directors are not entitled to any remuneration as of right. They become

entitled 10 remuneration when the articles so provide or when a resolution

is passed by the members granting them remuneration.  In’re George

 Newman <S Col' Stroud i Royal Aquarium, etc. Society.1

c)  R and  H were appointed managing directors of the company for the first

time after the coming into force of the Act. The Law Board, while grantingapproval, inserted the condition that the total remuneration of each

managing director by way of commission and salary shall do not exceed

Rs. 12,000 per annum. The said remuneration was in addition to the benefit

of certain perquisites which would be available to the managing directors.