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Director remuneration as per Companies Act, 2013.

Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 Anil Dhawan asked over 2 years ago

Directors of ABC Limited have been given the following remuneration -- Guarantee Commission has been paid to them for having guaranteed the term loans obtained from a financial institution. Examine the validity of the above payment in the light of the provisions of the Companies Act, 2013.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 megha answered over 2 years ago

hello, Guarantee Commission: Section 309[1] provides that the remuneration payable to any director shall be inclusive of the remuneration payable for services rendered by him in any other capacity. The question is whether the guarantee commission is a remuneration is within the meaning of section 309. It was held in Suessen Textile Bearing Ltd v. Union of India [(1984) 55 (Comp. Cases 492, 496, 497)] that the guarantee commission paid to directors for giving surety against loans or credit facilities taken by the company from financial institution is not a remuneration for within the meaning of section 309 and therefore, approval of the Central Government is not necessary. The director giving guarantee does not render manual, clerical, technical, supervisory or administrative service. He gets the commission for the risk which he bears and that has nothing to do with his directorship. Hence the payment of guarantee commission is in order.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 ranjan bhutani answered over 2 years ago

Guarantee Commission: Here, the question that arises is whether the guarantee commission is “”remuneration” under the Act. It was held in Suessen Textile Bearings Ltd v. Union of India [(1984) 55 (Comp. Cases 492, 496, 497)] that the guarantee commission paid to directors for giving surety against loans or credit facilities taken by the company from financial institution is not a remuneration for within the meaning of section 309 of the earlier Companies Act, 1956 and therefore, approval of the Central Government is not necessary. The director giving guarantee does not render manual, clerical, technical, supervisory or administrative service. He gets the commission for the risk which he bears and that has nothing to do with his directorship. Hence the payment of guarantee commission is in order.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 Chirag answered over 2 years ago

**Guarantee Commission:** Here, the question that arises is whether the guarantee commission is “”remuneration” under the Act. It was held in Suessen Textile Bearings Ltd v. Union of India [(1984) 55 (Comp. Cases 492, 496, 497)] that the guarantee commission paid to directors for giving surety against loans or credit facilities taken by the company from financial institution is not a remuneration for within the meaning of section 309 of the earlier Companies Act, 1956 and therefore, approval of the Central Government is not necessary. The director giving guarantee does not render manual, clerical, technical, supervisory or administrative service. He gets the commission for the risk which he bears and that has nothing to do with his directorship. Hence the payment of guarantee commission is in order. Considering the above, it may be concluded that the guarantee commission paid to the directors for guarantee provided on loan from a financial institution is valid.

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