Articles of Association of a listed company has fixed payment of sitting fee for each Meeting of Directors subject to maximum of Rs.10 000 in view of increased responsibilities of independent directors of listed companies, the company proposes to increase the sitting fee to Rs, 25,000 per meeting. Advise the company about the requirements under the Companies Act. 1956 to give effect to this proposal.
The given problem relates to section 309 of the Companies Act, 1956, as explained below:
(a) The amount of sitting fees shall not exceed the sum prescribed. As per Notification No. GSR 580(E),dated 24.7.2003, the sum prescribed is -
(i) Rs. 20,000, in case the aggregate of paid up share capital and free reserves of the company is Rs. uses or more or the turnover of the company is Rs. 50 crores or more;
(ii) Rs.10, 000, in case of any other company.
(b) Sitting fees in excess of the sum prescribed can be paid only with the approval of the Central Government.
Thus, in the given case, the increase in sitting fees from Rs. 10,000 to Rs. 25,000 per Board meeting is not permissible unless approval of the Central Government is obtained.
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