Remuneration to professional directors


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:

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 of their registration. 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.

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 of registration.

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. 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. The registered location may be placed in the Coimbatore registrar of companies.


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