Page 295 - DMGT407Corporate and Business Laws

Corporate and Business Laws

Notes otherwise for a fraudulent or unlawful purpose or in a manner prejudicial to public
interest.
9. Resignation by a Director. There is nothing in the Act as to whether and by what procedure,
a director can resign. The Act, however, indirectly recognises resignation through the
provisions in s.318 one of which is that no director is entitled to compensation if he resigns
his office. In S.S. Lakshmana Pillai v. Registrar of Companies (1977) 47 Comp. Cas. 652
(Mad), it was held, that if there is a provision in the articles, resignation will take effect in
accordance with such provision and if there is no provision, resignation will take effect in
accordance with its terms. Notice may be written or oral.

10. Directors not to Hold Office or Place of Profit. Section 314 imposes certain restrictions on
the holding of office or place of profit in a company by the directors and their associates.
Following is the summary of restrictions so provided:
(a) No director of a company shall hold any office or place of profit (carrying any
remuneration) under the company or its subsidiary except with the consent of the
company by a special resolution. It shall, however, be sufficient if the special
resolution is passed at the first general meeting held after such appointment.

A director shall be deemed to hold an office or place of profit under the company if
the director holding an office obtains from the company anything by way of
remuneration over and above the remuneration to which he is entitled as such
director. Such remuneration may be by way of salary, fees, commission, perquisites,
the right to occupy free of rent any premises as a place of residence or otherwise.
(b) Except by passing a special resolution, partner or relative of such director, no firm in
which such director or a relative of such director, is a partner, no private company of
which such director is a director or member and no director, or manager of such a
private company shall hold any office or place of profit carrying a total monthly
remuneration of such sum as may be prescribed (presently ` 3,000 per month).
Again, special resolution may be passed at the first general meeting after the
appointment made. Where, however, the aforesaid appointment made without the
knowledge of the director, the consent of the company may be obtained either in the
general meeting aforesaid or within 3 months from the date of the appointment,
whichever is later.

However, a director or any of his associates may be appointed as managing director,
manager, banker or trustee for the debenture holders of the company without sanction
of special resolution, if the remuneration received from such subsidiary in respect
of such office or place of profit is paid over to the company or its holding company.
For the aforesaid appointment of a director or his associates, special resolution shall
not only be necessary at the time of first appointment but also for every subsequent
appointment on a higher remuneration not covered by the special resolution except
where an appointment on a time-scale has already been approved by the special
resolution.

It may be noted that the aforesaid restrictions do not apply where a relative of a
director or a firm in which such relative is a partner holds any office or place of
profit under the company or a subsidiary thereof having been appointed to such
office or place before such director became a director of this company.
(c) (i) No partner or relative of a director or manger, (ii) no firm in which such director
or manger, or relative of either is a partner, (iii) no private company of which such
a director or manager, or relative of either, is a director member, shall hold an office
or place of profit in the company carrying a total monthly remuneration of not less

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