Rule 320: Admission of company directors to a gratuity fund
Rule 320 restricts directors. Rules 316 to 329 govern approved gratuity funds under Part B of Schedule XI to the Act. Where the employer is a company, a director may be admitted to the fund only if a whole-time bona fide employee of the company who does not beneficially own shares carrying more than 5% of total voting power.
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Bare law
Rule 320 - Admission of directors to a fund
Where the employer is a company as defined in section 2(20) of the Companies Act, 2013 (18 of 2013), a director of the company may be admitted to the benefits of the fund only if he is a whole time bona fide employee of the company and does not beneficially own shares in the company carrying more than 5% of the total voting power.
Rule breakdown
Two conditions
Whole-time bona fide employee.
Beneficial shareholding not more than 5% of voting power.
Key takeaways
Whole-time
Required.
5% limit
Voting power cap.
Superannuation parallel
Rule 304.
Practical checklist
- Check director shareholding annually.
Avoid
- Do not admit part-time directors.
FAQs
Can a director with 6% voting power join?
No (Rule 320).
Must the director be whole-time?
Yes.
Is the superannuation rule the same?
Rule 304 has the same conditions.
Glossary
- Voting power
- Voting rights attached to shares.
- Bona fide employee
- A genuine employee of the company.