Office or place of profit.

(Section 314 of the Indian Companies Act, 1956)

This provision in the Companies Act, 1956 is the contribution of its amendment in 1960. Section 314(3) defines the term office or place of profit s follows:

If a Director holds an office or place	If he obtains from the company anything by way of remuneration over and above the remuneration to which he is entitled as a Director. It may salary, fees, commission, perquisites, free accommodation etc.
Any other person, firm, body corporate holds an office or place	If they obtain anything by way of remuneration from the company. It may salary, fees, commission, perquisites, free accommodation etc.

Astley v. New Tivoli company

Any regular payment received by a Director so long as he holds the post will be an office/place of profit.

The post of Managing Director, Manager, banker and debenture trustee are not office or place of profit for the purpose of section 314(1). Department of corporate Affairs has clarified that unless the remuneration paid to a Managing Director or Whole Time Director is over and above the remuneration to which he is entitled, such a holding will not considered as an office or place of profit.

Firstone tyre & Rubber company v. Synthetics & Chemicals Limited.

A private company was appointed as sole selling agent of a public company. Same persons are in the Board of those Companies. In this case, the Bombay High Court held that the private company is appointed to an office or place of profit and hence Section 314 was attracted.

Conditions to hold office or place of profit.

1.   A special resolution should be passed in General Meeting for

                     I.        A Director

                   II.        Relative of Director( if more than Rs.10,000)

                 III.        Partner of Director( if more than Rs.10,000)

                 IV.        Firm in which the Director is a partner( if more than Rs.10,000)

                   V.        Firm in which relative of such Director is a partner( if more than Rs.10,000)

                 VI.        Private company of which the Director is a Director/member( if more than Rs.10,000)

               VII.        Director/ manager of the private company( if more than Rs.10,000)

2. Prior consent of the company by a special resolution and Central Government approval is required in the following cases, if total monthly remuneration is not less than Rs. 50,000.

                     I.        Relative of Director

                   II.        Partner of Director

                 III.        Firm in which the Director is a partner

                 IV.        Firm in which relative of such Director is a partner

                   V.        Private company of which the Director is a Director/member

                 VI.        Director/ manager of the private company

To obtain approval of Central Government, eform 24B has to be filed.

Any appointment in contravention to the above provision, such place/office shall be deemed to be vacated and any remuneration received shall be refunded to the company. The company cannot waive the recovery of any such sum.

Some important points:

1.	This is applicable to both private and public companies.
2.	This section is not applicable to Directors appointed under section 408.
3.	Special resolution is necessary for any subsequent appointment on a higher remuneration.
4.	This Section shall not apply, if a relative of a Director has been appointed for an office or place of profit before such a Director become Director of the company.
5.	If the appointment to the office or place of profit has been made without the knowledge of the Director, the consent shall be obtained in the first general meeting or within three months whichever is later.
6.	This Section does not applicable to the appointment of The post of Managing Director, Manager, banker and debenture trustee.
7.	Every individual or firm or private company or any body corporate is required to declare in writing that he is not connected with the Directors of the company
8	Without the permission of Central Government, the company cannot waive the recovery of any sum.
9.	If an advocate or solicitor is appointed on a regular retainer basis for rendering legal advice, other than appearing in Court, the provisions of Section-314 is applicable.