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    Interpretation of the term Executive Director

    Posted By : ARUN GANDHI / Published on : 26-Jul-2022 04:52 AM / View : 346 / Comment : 1

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    Dear all,

    A director getting remuneration is an Executive director. Can this be
    taken as a true and correct interpretation of the term since a proper
    definition of the executive director is not mentioned in the Act?
    Read more on : director executive term interpretation

    • Dear Arun!

      The term Executive Director is defined under Rule 2(1)(k) of the Companies (Specification of definitions details) Rules, 2014 as:

      “Executive Director” means a whole time director as defined in clause (94) of section 2 of the Act.


      Further, as per Section 197(1)(ii): 

      The remuneration payable to Directors who are neither managing Directors nor whole time directors shall not exceed,—

      (A) one per cent. of the net profits of the company, if there is a managing or whole-time director or manager;

      (B) three per cent. of the net profits in any other case.


      Consequently, the statement "A director getting remuneration is an Executive director" is not true as per above discussion the Non-Executive Directors also allowed to receive remuneration.


      27-07-2022 / 05:25:19 AM
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