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Special Resolution Alteration in Articles for Sitting Fees Payment

The Directors, esp. Non-Executive Directors, are generally paid sitting fees for attending the meetings of the Board of Directors and Committees thereof. [Ref: Section 197(5) of the Companies Act 2013]

If the Articles of Association of a company restrict such payment, then the Articles can be amended after getting approval of the shareholders by passing of a special resolution in their general meeting. [Ref: Section 14 of the Companies Act 2013]

Special Resolution for alteration in articles for Sitting Fees paymentSpecial resolution can be passed for alteration of the Articles of Association with regard to sitting fees for different purposes, including:
(1) Existing Article - No sitting fees payment; New (alteration) - Fix sitting fees amount limit;
(2) Existing Article - Sitting fees payment is less; New (alteration) - Increase the sitting fees limit;
(3) Existing Article - Sitting fees payment is more; New (alteration) - Reduce the sitting fees limit.

The above changes have to be done within the limit as specified under Rule 4 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, which limits the sitting fees payment to a director for an amount up to one lakh rupees per meeting of the Board or a committee thereof.

Templates of such special resolutions are as follows —


SAMPLE #1

#. Alteration of the Articles of Association of the company with respect to payment of sitting fees to the directors

To consider and if thought fit, to pass with or without modification(s), the following resolution as a Special Resolution:

“RESOLVED THAT pursuant to the provisions of Section 14 of the Companies Act, 2013 and other applicable provisions, if any, (including any statutory modification(s) or re-enactment(s) thereof for the time being in force), the consent of the Members of the company be and is hereby accorded for alteration of the Articles of Association of the company as follows:

The existing Article No. ... of the Articles of Association of the company be and is hereby substituted by the following Article:

 #. Company may pay sitting fees to any class of its Directors or to all of them as may be decided by the Board of Directors or a committee thereof for attending meetings of the Board or its committees, such sum of money as may be determined by the Board which shall not exceed INR ..../- (Rupees ................only) per meeting of the Board or committee thereof, attended by a director.

RESOLVED FURTHER THAT the Board of Directors of the company be and is hereby authorized to do all such acts, things, matters and deeds and to take all such steps as may be necessary, proper or expedient to give effect to the foregoing resolution.”



Explanatory Statement pursuant to Section 102 of the Companies Act, 2013

The Board of Directors of the company, at their Meeting held on (Date), has decided to alter the Articles of Association of the company in the following manner and the Board hereby proposes for its approval by the members.

Existing Article .... provides that payment of sitting fees to Directors shall not exceed Rs. ...../- for every meeting of the Board or committee thereof, attended by a Director. 

Your Directors have been receiving sitting fees at the above rate for the last ...years. In consideration of the high inflation in the last few years, it is proposed to increase the sitting fees accordingly from (.......) to (......) per meeting per director.

Hence, in order to increase the sitting fees limit, the amendment of the Articles of Association is necessary for the existing Article number .... The proposed new (substituted) Article no. ... will confer authority on the Board to decide the sitting fees amount payable to directors. The members be informed that the above limit is within the maximum limit prescribed under the Companies Act 2013 and rules made thereunder. Section 14 of the said Act, prescribes the requirement of Special resolution for alteration of the Articles of Association.

The specimen of the amended Articles of Association is available for inspection by the members at the Registered Office of the company on all working days except Saturdays between (time) to (time) up to the date of the Annual General Meeting of the company.

All Directors and their relatives are presumed to be interested in the foregoing resolution as the payment of sitting fees are to be made to Directors. None of the key managerial personnel and their relatives is interested, financially or otherwise in the above Resolution.

The Board commends the Resolution as set out at Item No. ... in the Notice.

........................................................


SAMPLE #2

#. Alteration of the Articles of Association of the company

To consider and if thought fit, to pass with or without modification(s), the following resolution as a Special Resolution:

“RESOLVED THAT pursuant to the provisions of Sections 5, 14 and any other applicable provisions of the Companies Act, 2013 and Rules thereunder, as amended from time to time, and subject to such approvals, consents, sanctions and permissions of appropriate authorities as may be necessary, the Articles of Association of the company, be and is hereby altered in following manner:

In the Articles of Association of the company, Article ... be and is hereby substituted with the following new Article:
 “Company may pay a sitting fee to a director for attending meetings of the Board or committees thereof, such sum as may be decided by the Board of directors thereof from time to time within the limit and in accordance with the provisions of the Companies Act, 2013 and rules made thereunder.”


EXPLANATORY STATEMENT
[Section 102(1) of the Companies Act, 2013]

At present, as per Article no. ... of the Articles of Association of the company, a Director may be paid a sum of INR .......... by way of sitting fees for each meeting of the Board of Directors or committee thereof attended by him/her. The amount was fixed long time back in the year of (year), and several years have passed since then but there has not been any increase in the fees in line with the increase in inflation.

In consideration of the increase in burden of certain advisory and other activities for non-executive directors in the interest of the company, the Board proposes for an increase in sitting fees as well within the maximum limit prescribed under Section 197(5) the Companies Act, 2013 (and rules made thereunder) i.e. INR 1 lakh per meeting of the Board / committee attended by a Director. The Managing Director and Whole-time Directors currently do not receive any sitting fees as per their terms of appointment.

In terms of Section 14 of the Companies Act, 2013, any alteration in the Articles of Association of the company requires approval of the members of the company by way of Special Resolution.

Since the payment of sitting fees are to be made to the Directors, all Directors of the company/their relatives are presumed to be interested in the resolution set out at Item No. ... of the Notice. Other than this, none other key managerial personnel or any of their relatives are, in any way, concerned or interested, financially or otherwise, in the resolution set out at Item No. ... of the Notice.

Accordingly, consent of the members is sought for passing Special resolution as set out at Item No. ... of the Notice for alteration of the Articles of Association of the company.

The Board commends the special resolution set out at Item No. ... of the Notice.



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NOTE: The resolution sample(s) here is only for reference, to help you with drafting. Do refer the exact provisions of the Act, relevant rules framed thereunder and any other applicable laws to be able to not to miss out anything important while drafting.

Comments

  1. Jacki Patel4/19/2019

    Thank you very much! Have referred it for drafting the resolution.

    ReplyDelete

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