The act has fixed that the total remuneration
payable to all directors in a company shall not exceed 11% of its net profits
computed in the manner laid down in sections 349 and 350 of the act. These
provisions do not apply to a private limited company.

It has already been mentioned that the managerial
remuneration payable to any one person (Managing director, Whole-time director,
Manager) shall not exceed 5% of the net profit.

Director Rendering Professional Services

 A director,
who holds specialized qualification may be appointed in a professional capacity
corresponding to his qualification, like technical director or finance
director, etc. Such appointment shall be made:

If the services rendered are of a professional
nature

In the opinion of the central government, the person
possesses the requisite qualification for the practice of the profession.

No form is prescribed for making the above
application to the central government. But the bank draft/challan for fees
prescribed under companies (Fees on Applications) Rules, 1999. To be eligible
to call oneself as a professional, the person must have professional
qualification and he must use his professional knowledge and skill for
rendering services. Membership of a professional body may be one aspect which
will be considered. By way of illustration it may be stated that an engineer,
medical, doctor, editor of newspapers and magazines, journalists, solicitor and
advocate, architect and similar such persons may be taken to be exercising a
profession.

Approval under section 314 also required

Where a director is appointed in his professional
capacity, such appointment shall also be approved by the members by special
resolution at the general meeting held  first  after
the appointment is made.

Position of secretary holding office as
director

The department has clarified that the appointment of
whole-time company secretary as a part-time director on the board did not
require the approval of the central government under section 269(1) of the act.

Can a director be appointed as manager?

As per the definition, a Manager includes a director
occupying the position of manager. Accordingly a director of a company may also
be appointed as manager under schedule without government approval. As such
person will be a director with managerial powers, he should not have been
disqualified as per section 385 within the preceding five years.

Further the said appointment need not be approved by
the general meeting by special resolution in terms of section 314, in view of
the exemption.

Designating employees as special
directors with no membership on the board

The department’s clarification vide circular
No.11/90 dated 29-5-1990 on this matter is quoted below:

I am directed to refer to this department circular
no.1/1/82-CL.V dated 20-1-1983 addressed to all chambers of commerce and to say
that many companies are still designating their executives, who are not members
of the board of directors, as special directors etc. Such designations give an
impression to public at large and those dealing with these companies and the
executives that they are full-fledged directors entitled to act as such on
behalf of the companies. If in fact these executives are not directors on the
board of the companies, it will be patently wrong on the part of the companies
to designate them as directors.

 

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