Payment of commission to Non-Whole Time Directors of the company under section 309(4) (b) of the Companies Act, 1956

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General Circular No. 4/2011 , Dated:- 4th March, 2011

Companies are making applications to the Central Government for payment of remuneration in the form of commission to their Non-Whole Time Director(s) even when the total commission to be paid to all the Non-Whole Time Director(s) taken together falls within the limit of 1% of net profit of the company under Section 198 of the Act [when the company has a Whole Time Director(s) or a Managing Director(s)] or within the limit of 3% net profit of the company under Section 198 of the Act [when the company does not have a Managing Director or a Non-Whole Time Director(s)] in addition to the sitting fee. This is based on a decision of this Ministry taken in File No. 6(a) CL-I/66 issued several decades back.

It has now been decided that a company shall not require approval of the Central Government for making payment of remuneration by way of commission to its Non- Whole Time Director(s) in addition to the sitting fee if the total commission to be paid to all those Non-Whole Time Directors does not exceed 1% of the net profit of the company if it has a Whole Time Director(s) or 3% of the net profit of the company if does not have a Managing Director or Whole Time Director(s).