Managerial remuneration - Basis for determination of director’s remuneration ‑ Payment of Guarantee Commission to directors, whether ‘remuneration’ - Companies Law - Circular : No. 3 of 1994,

Circular : No. 3 of 1994, dated 16 ‑ 2 ‑ 1994. Subject:-Managerial remuneration - Basis for determination of director s remuneration ‑ Payment of Guarantee Commission to directors, whether remuneration I am directed to say that this Department had issued a Circular No. 14/50‑CL‑V, dated 16‑12‑1969 according to which Guarantee Commission payable to the directors for personal guarantee on loans to the Company was to be treated as remuneration under section 309(1). In Suessen Textiles Bearings Ltd. v. Union of India [1984] 55 Comp. Cas.492, it was held by Delhi High Court that Guarantee Commission paid by a Company to its director for standing surety for loans and credit facilities taken by the Company was not remuneration for services rendered within the meaning of section 309 of the Companies Act, 1956 and approval of the Central Government was not necessary. 2. In view of the aforesaid judgment, the Department has decided to withdraw its aforesaid Circular dated 16‑12-1969.