Managerial remuneration - Director’s remuneration by way of commission ‑ Pre-requisite for Central Government’s approval under sub‑section (4) - Companies Law - Letter : No. 8/2(Misc.)/75‑CL‑V,

Letter : No. 8/2(Misc.)/75 ‑ CL ‑ V, dated 31 ‑ 3 ‑ 1976. Subject:- Managerial remuneration - Director s remuneration by way of commission ‑ Pre-requisite for Central Government s approval under sub ‑ section (4) Query : Under the provisions of the Act, where a company has a managing director, commission of 1 per cent is permitted to be paid to the other directors and where there is no managing director, commission up to 3 per cent can be paid. Where commission was previously not paid because of financial difficulties and the company subsequently applies for payment of commission as per the agreement, articles or resolution of the board of directors, the Department refuses sanction and questions about additional specific duties and functions performed by the directors. There is no justification for this and the commission should in the normal course be sanctioned under the provisions of the Act. Answer : The matter regarding the payment of commission to directors has since been considered. The Department is not in favour of allowing this commission to ordinary directors in companies which are managed by managing/whole‑time directors. In case where the companies are not managed by managing/whole‑time directors and some specific duties have been entrusted to the directors, this Department has been allowing commission of 1 per cent subject to a ceiling of Rs. 10,000 per annum.