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Sitting Fees Payment to Directors including Executive Directors

Relevant Provisions

• Section 197(5) of the Companies Act, 2013.
• Rule 4 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.


What is a sitting fee? Meaning.

The payment of a fee to a director of the company for attending a meeting of the board of directors or committee thereof is called as a sitting fee.

In addition to payment of sitting fees, other expenses like travelling and lodging expenses are also reimbursed by the company to the directors attending the meeting.


Who are eligible to be paid sitting fees?

Any director of the company including independent directors and women directors are eligible to receive sitting fees for attending the board or committee meetings.


How much sitting fees can be paid? Maximum Limit

The sitting fees amount limit is decided and fixed by the board of directors in its meeting.

It can fix any amount of sitting fees subject to a maximum of Rs. 1 lakh per meeting of the board or a committee thereof.

Women Directors and Independent Directors shall not be paid the sitting fees less than the amount as payable to other directors


Can executive directors be paid sitting fees?

The Companies Act, 2013 does not specifically have any provisions restricting the payment of sitting fees to executive directors viz. Managing Director (MD) or Whole-time Director (WTD).

Therefore, they can also be paid sitting fees for attending meetings of the board or a committee thereof.

Generally, the executive directors are not paid any sitting fees.

Most of the cases, during the approval of their appointment and terms of remuneration in the board and general meeting, it is clearly mentioned in the resolutions that they will not be paid any sitting fees.

Also, the articles of most of the companies contains provisions restricting payment of sitting fees to executive directors.

However, a company may amend such clause in the articles (by completing due process as required for alteration) to allow payment of sitting fees to executive directors as well.


Is sitting fees included in overall managerial remuneration?

No. Refer sub-section (2) of Section 197 of the Companies Act, 2013.

Comments

  1. IF INDIAN COMPANY(hOLDING ) WANTS TO GIVE SITTING FEES TO A COMMON DIRECTOR IN ITS WHOLLY OWNED SUBSIDIARY COMPANY WHAT COMPLIANCES NEED TO BE MADE BY iNDIAN cOMPANY

    ReplyDelete
  2. Prem gutha: Ther is no need for any further compliance but AOA of the company should have the power to do the same.If AOA doesn't contain such power can amend it by passing a special resolution.

    ReplyDelete

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