Prohibition against director holding ‑ While applying for the approval of appointment, applicant‑ companies are to spell out in special resolutions nature and quantum of perquisites to be allowed to a relative director - Companies Law - Letter : No. 1/12/CL-IX/88,

Letter : No. 1/12/CL-IX/88, dated 21 ‑ 4 ‑ 1988. Subject:- Prohibition against director holding ‑ While applying for the approval of appointment, applicant ‑ companies are to spell out in special resolutions nature and quantum of perquisites to be allowed to a relative director Under the provisions of section 314(1B), the Central Government s approval is, inter alia, required to be obtained in cases where relatives of directors, etc., are appointed in a company to hold any office or place of profit which carries a monthly remuneration of not less than Rs. 3,000 per month. While scrutinising the applications seeking such approvals, it has been noticed that the perquisites proposed to be granted to such employees are not clearly spelt out in the special resolution approving the appointments of the concerned persons and in the applications made to the Central Government. This entails needless correspondence with the applicant‑companies causing avoidable delay in the processing of applications. In order to avoid this, it is suggested that the companies should clearly spell out in the special resolutions passed in pursuance of section 314(1B) of the Companies Act, the nature and quantum of perquisites proposed to be allowed. It is needless to add that the nature and quantum of perquisites to be allowed in the case of a relative director should be of the same kind and at the same rate as allowed to other employees of equivalent grade of the company. Scrutiny of proposals sent under section 314(1B) of the Act, would be facilitated if evidence such as copies of rules framed by the company or auditor s certificates, etc., are furnished along with the applications to show that the benefits proposed to be allowed to the appointees are also admissible to other employees of equivalent grade of the company.