The permission is conditional and specific
Section 197(14) of the Companies Act, 2013 provides a limited non-disqualification rule: a director receiving commission from a company, who is also its managing director or whole-time director, is not disqualified from receiving remuneration or commission from its holding company or subsidiary, subject to disclosure by the company in its Board's report and to the provisions of section 197. Treat it as a conditional rule, not an unrestricted permission for every director to collect remuneration from every group entity. The examples use ordinary public-company facts within section 197's remuneration framework. Companies Act, 2013, section 197(14), ICSI e-book.
Document both parts of the director-level trigger
Identify the relevant company, the director's managing or whole-time role in that company, and the commission received from that company. Do not replace those facts with a generic designation such as group CEO. A non-executive role without the stated conditions cannot be brought within this subsection merely by drafting a broad group remuneration policy. Record the relevant period as well: roles and entity relationships may change during a year. Companies Act, 2013, section 197(14), ICSI e-book.
Draw the legal group perimeter before adding amounts
The subsection refers to a holding company or subsidiary of the relevant company. A fellow subsidiary is not automatically that company's holding company or subsidiary merely because both share a parent. Verify the actual relationship under the Act and preserve the group chart with effective dates. If a payment falls outside this narrow perimeter, that does not by itself decide whether another provision permits it; it means section 197(14) is not the established basis for that payment. Companies Act, 2013, section 197(14), ICSI e-book.
Keep paying-company compliance separate
The opening words preserve the other provisions of section 197. Each company must assess the approvals, limits and other applicable conditions governing its own payment. The subsection does not create a combined group pool that lets unused headroom in one company validate another company's excess. A consolidated personal-remuneration total is a useful reconciliation; it is not a replacement for the paying-company statutory computation. Appointment eligibility and other applicable requirements also need separate review. Companies Act, 2013, section 197(14), ICSI e-book.
Prepare a Board-report evidence pack
Build an entity-wise schedule showing the recipient, role, relationship, nature of remuneration or commission, period, amount, approvals and amounts paid or outstanding on the adopted accounting basis. Section 197(14) expressly makes disclosure by the company in the Board's report a condition. Reconcile the proposed disclosure to the supporting company records and the final adopted report. The subsection itself does not prescribe the particular spreadsheet layout used in this article. Companies Act, 2013, section 197(14), ICSI e-book.
Avoid silent netting and scope inflation
Do not net a subsidiary payment against remuneration due from the main company merely to make the report appear smaller. Reimbursements, perquisites, commission, salary and accruals require correct legal and accounting classification; this guide does not declare every cash movement remuneration. Nor does the subsection settle income-tax withholding, listed-entity obligations or every related-party issue. Keep those analyses separate and link the conclusions to the same underlying payment records. Companies Act, 2013, section 197(14), ICSI e-book.
Applicable primary references
Companies Act, 2013, section 197(14), ICSI e-book
Six worked illustrations
All facts and amounts below are fictional. Assumptions describe the model, not additional statutory rules.
Illustrative example 1: Main-company and parent remuneration
Assume all relevant conditions and approvals are satisfied. Company A's MD receives ₹20 lakh salary and ₹5 lakh commission from A, and ₹8 lakh remuneration from its holding company. The personal reconciliation total is ₹33 lakh, comprising ₹25 lakh from A and ₹8 lakh from the parent. Section 197(14) is not a declaration that ₹33 lakh is a universally permissible cap.
Illustrative example 2: Add a subsidiary without netting
Using the same verified facts, a subsidiary pays a further ₹4 lakh remuneration. The entity-wise amounts are ₹25 lakh, ₹8 lakh and ₹4 lakh, totalling ₹37 lakh. A worksheet showing only A's ₹25 lakh omits ₹12 lakh of external group remuneration from the reconciliation; the exact disclosure must reflect the applicable facts and condition.
Illustrative example 3: Find the omitted external payment
The disclosure support lists commission of ₹6 lakh from the relevant company and remuneration of ₹10 lakh from its holding company. The proposed narrative mentions only ₹6 lakh. The reconciled amount across these two categories is ₹16 lakh, with ₹10 lakh absent from that draft support. The reviewer corrects the disclosure pack rather than treating the main-company commission as a substitute for external-payment disclosure.
Illustrative example 4: Separate a fellow subsidiary
A director's external group receipts comprise ₹2 lakh from A's parent and ₹7 lakh from a fellow subsidiary that is neither A's parent nor A's subsidiary. External receipts total ₹9 lakh. Only the ₹2 lakh relationship has been established within section 197(14)'s stated perimeter; the ₹7 lakh needs its own legal analysis. This is a scope allocation, not a conclusion that the latter payment is necessarily unlawful.
Illustrative example 5: Reconcile earned, paid and outstanding amounts
Assume an applicable accounting review has established ₹12 lakh remuneration for the period from the holding company. Payments are ₹9 lakh, leaving ₹3 lakh outstanding. A cash-only worksheet of ₹9 lakh misses the ₹3 lakh accrual difference. The subsection does not supply an accounting recognition policy; the evidence pack reconciles the properly determined basis to the disclosure.
Illustrative example 6: Align the period of service
Assume the verified relevant period is six months at ₹2 lakh per month plus a properly authorised ₹2 lakh commission for that period. The support total is ₹14 lakh: ₹12 lakh monthly remuneration and ₹2 lakh commission. Applying twelve months instead would produce ₹26 lakh and overstate this model period by ₹12 lakh. Verify actual role and relationship dates before selecting months.
Ten-step verification table
| Step | Action | Evidence |
|---|---|---|
| 1 | Identify the relevant company | Company class and section 197 applicability note. |
| 2 | Verify the director's role | MD or whole-time appointment record and dates. |
| 3 | Verify the commission trigger | Relevant-company commission record and supporting entitlement. |
| 4 | Map the group relationships | Holding and subsidiary evidence with effective dates. |
| 5 | List every external paying entity | Entity identifiers and nature of each payment. |
| 6 | Check each company's compliance | Separate approvals and applicable remuneration computation. |
| 7 | Reconcile period and classification | Salary, commission and other properly classified amounts. |
| 8 | Bridge accruals and cash | Earned, paid and outstanding amounts on the adopted basis. |
| 9 | Complete the Board-report disclosure | Draft text tied to the supporting schedule. |
| 10 | Retain final evidence | Adopted report, approval records and separately reviewed allied obligations. |
Sixteen practitioner FAQs
1. Does section 197(14) apply to every director?
Its stated conditions concern a director receiving commission from the company who is its MD or whole-time director.
2. Is the title group CEO sufficient?
No. Establish the statutory role in the relevant company and the other conditions.
3. Why verify commission from the relevant company?
It is an express element of the subsection's stated trigger.
4. Does the external amount have to be commission only?
The provision refers to remuneration or commission from the holding company or subsidiary.
5. Is a fellow subsidiary automatically within the perimeter?
No. Establish whether it is actually the relevant company's holding company or subsidiary.
6. Does an out-of-perimeter payment automatically become illegal?
This subsection does not decide that. Review the separate legal basis and applicable restrictions.
7. Does the subsection remove other section 197 requirements?
No. It expressly operates subject to that section's provisions.
8. Can unused remuneration headroom move between group companies?
This subsection does not create such a group pool; review each paying company's requirements separately.
9. Why total payments across entities at all?
The total helps detect omissions and reconcile disclosure, without replacing company-specific compliance.
10. Which company has the stated Board-report disclosure condition?
The subsection requires disclosure by the relevant company in its Board's report.
11. Does the Act mandate the worksheet format illustrated here?
No particular format is prescribed by this subsection; the worksheet is an evidence control.
12. Should payment dates alone determine the reported amount?
Reconcile cash to the properly determined applicable accounting and disclosure basis, including relevant outstanding amounts.
13. Can subsidiary remuneration be silently netted against main-company remuneration?
That would obscure the entity-wise facts. Assess each amount and disclose on the appropriate supported basis.
14. Are all reimbursements necessarily remuneration?
No. Classification needs its own substantive analysis.
15. Does this guide settle tax withholding or listed-company rules?
No. Those obligations require separate applicable-law review.
16. What is the final review evidence?
The actual role and group records, company-specific approvals, reconciled amounts and the adopted Board-report disclosure.
Conclusion
Review holding and subsidiary remuneration under section 197(14), linking the director’s role, commission trigger, entity approvals and Board-report disclosure.