Payment of commission to Non-Whole Time Directors of the company under section 309(4) (b) of the Companies Act, 1956. - Companies Law - 04/2011

General Circular No. 04/2011 F. No. 14/6/2011-CL-VII Government of India Ministry of Corporate Affairs 5 th Floor, A Wing. Shastri Bhawan, New Delhi, Dated:- 4 th March, 2011 To All Regional Directors All Registrar of Companies The Institute of Company Secretaries of India The Institute of Chartered Accountants of India The Institute of Cost and Works Accountants of India Subjects: Payment of commission to Non-Whole Time Directors of the company under section 309(4) (b) of the Companies Act, 1956. Companies are making applications to the Central Government for payment of remuneration in the from of commission to their Non-Whole Time Director(s) even when the total commission to be paid to all the Non-Whole Time Director(s) taken together falls within the limit of 1% of net profit of the Company under Section 198 of the Act [when the company has a Whole Time Director(s) or a Managing Director(s)] or within the limit of 3% net profit of the company under section 198 of the Act [when the company does not have a managing Director or a Non-Whole Time Director(s)] in addition to the sitting fee. This is based on decision of this Ministry taken in File No. 6(a) CL-I/66 issued several decades back. 2. It has now been decided that a company shall not require approval of the Central Government for making payment of remuneration by way of commission to its Non-Whole Time Director(s) in addition to the sitting fee if the total commission to be paid to all those Non-Whole Time Directors does nor exceed 1% of the net profit of the company if it has a Whole Time Director(s) or 3% of the net profit of the Company if does not have a managing Director pr Whole Time Director(s). L.K. Trivedi) Under Secretary