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.
0
0
Answer Now
Comment
Report
3
Answers
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.
Important Note โ Preparing for FINANCE?
CAKART provides Indias top faculty each subject video classes and lectures โ online & in Pen Drive/ DVD โ at very cost effective rates. Get video classes from CAKART.in. Quality is much better than local tuition, so results are much better.
Watch Sample Video Now by clicking on the link(s) below โ
For any questions Request A Call Back
Guarantee Commission:
Here, the question that arises is whether
the guarantee commission is โโremunerationโ 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.
**Guarantee Commission:**
Here, the question that arises is whether
the guarantee commission is โโremunerationโ 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.