SECTION 197 A

RESTRICTION ON APPOINTMENT OF DIFFERENT MANAGERIAL

PERSONNEL AT THE SAME TIME

Whether appointment of persons styled as special directors, director administration, etc., is desirable and permissible

Instances have come to the notice of the Department where companies have designated executives who are not members of the board as special director, director administration, etc. Such designations give an impression to public at large and those dealing with these companies and the executives that they are full-fledged directors entitled to act as such on behalf of the companies. If in fact these executives are not directors on the board of the companies, it will be patently wrong on the part of the companies to designate them as directors. The Department is, therefore, constrained to advise companies to desist from giving such designations to their executives which tend to mislead.

* CIRCULAR NO.2/82, DATED 20.1.1983.

Clarification on amendment of section 198(4) of the Companies (Amendment) Act, 1988

In the event of loss or inadequacy of profits, approval of the Central Government is not required for payment of remuneration if:

a) the appointment had been made in accordance with the terms and conditions specified in Schedule XIII; and

b) the resolution passed in the general meeting provided for a cut of 10% of the salary proposed to be paid, in terms of paragraph 2 of Part III of Schedule XIII to the Act.

Where it is proposed to pay remuneration by way of commission only in terms of para 2(ii) (under sub-head "Commission") of Part II of Schedule XIII, no remuneration shall be payable to the appointee in the event of loss.

* CIRJCULAR NO. 3, DATED 13.4.1989