Rule 304: Admission of company directors to a superannuation fund
Rule 304 restricts directors. Rules 301 to 315 govern approved superannuation funds under Part B of Schedule XI to the Act. A director of a company may receive benefits from the fund only if he is a whole-time bona fide employee of the company and does not beneficially own shares carrying more than 5% of the total voting power.
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Bare law
Rule 304 - Admission of directors to a fund
A director of a company, as defined in section 2(20) of the Companies Act, 2013 (18 of 2013), may only receive benefits from the fund, 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 of the company.
Beneficial shareholding not more than 5% of total voting power.
Key takeaways
Whole-time
Director must be a whole-time employee.
5% limit
Voting power not above 5%.
Both needed
Both conditions must be met.
Practical checklist
- Check the director's voting power each year.
Avoid
- Do not admit part-time directors.
FAQs
Can a promoter-director with 20% voting power join?
No, Rule 304 bars benefits where beneficial shareholding carries more than 5% of voting power.
Can a non-executive director benefit?
Only a whole-time bona fide employee qualifies.
Is there a similar rule for gratuity funds?
Yes, Rule 320.
Glossary
- Beneficial ownership
- Ownership of shares for one's own benefit.
- Voting power
- Voting rights attached to shares.