Amendment in Schedule XIII under powers conferred by sub-section (1) of section 641 of Companies Act, 1956
MINISTRY OF LAW JUSTICE AND COMPANY AFFAIRS
(DEPARTMENT OF COMPANY AFFAIRS)
NOTIFICATION
New Delhi, the 16th January 2002
G.S.R. 36(E).-In exercise of the powers conferred by sub section (1) of section 641 of the Companies Act, 1956 (1 of 1956), the Central Government hereby makes the following further amendments in Schedule XIII to the said Act, namely: –
In the said Schedule, in Part II, in section II,-(a) for paragraph 1, the following shall be substituted, namely: –
“1. Notwithstanding anything contained in this Part, where in any financial year during the currency of tenure of the managerial person, a company has no profits or its profits are inadequate, it may pay remuneration to a managerial person by way of salary, dearness allowance, perquisites and any other allowances,-
(A) not exceeding the ceiling limit of Rs.24,00,000 per annum or Rs.2,00,000 per month calculated on the following scale :-
Where the effective capital of Monthly remuneration payable shall not exceed Company is (Rupees)
(i) less than rupees 1 crore 75,000
(ii) rupees 1 crore or more but 1,00,000 less than rupees 5 crores
(iii) rupees 5 crores or more but 1,25,000 less than rupees 25 crores
(iv) rupees 25 crores or more but 1,50,000 less than rupees 50 crores
(v) rupees 50 crores or more but 1,75,000 less than rupees 100 crores
(vi) rupees 100 crores or more 2,00,000 :
Provided that the ceiling limits specified under this sub-paragraph shall apply, if –
(i) payment of remuneration is approved by a resolution passed by the Remuneration Committee;
(ii) the company has not made any default in repayment of any of its debts (including public deposits) or debentures or interest payable thereon for a continuous period of thirty days in the preceding financial year before the date of appointment of such managerial person.
(B) not exceeding the ceiling limit of Rs.48,00,000 per annum or Rs.4,00,000 per month calculated on the following scale :-
Where the effective capital of Monthly remuneration payable shall not exceed Company is (Rupees)
(i) less than rupees 1 crore 1,50,000
(ii) rupees 1 crore or more but 2,00,000 less than rupees 5 crores
(iii) rupees 5 crores or more but 2,50,000 less than rupees 25 crores
(iv) rupees 25 crores or more but 3,00,000 less than rupees 50 crores
(v) rupees 50 crores or more but 3,50,000 less than rupees 100 crores
(vi) rupees 100 crores or more 4,00,000 :
Provided that the ceiling limits specified under this sub-paragraph shall apply, if –
(i) payment of remuneration is approved by a resolution passed by the Remuneration Committee;
(ii) the company has not made any default in repayment of any of its debts (including public deposits) or debentures or interest payable thereon for a continuous period of thirty days in the preceding financial year before the date of appointment of such managerial person;
(iii) a special resolution has been passed at the general meeting of the company for payment of remuneration for a period not exceeding three years;
(iv) a statement along with a notice calling the general meeting referred to in clause (iii) is given to the shareholders containing the following information, namely; –
I. General Information :
(1) Nature of industry
(2) Date or expected date of commencement of commercial production
(3) In case of new companies, expected date of commencement of activities as per project approved by financial institutions appearing in the prospectus.
(4) Financial performance based on given indicators
(5) Export performance and net foreign exchange collaborations
(6) Foreign investments or collaborators, if any.
II. Information about the appointee :
(1) Background details
(2) Past remuneration
(3) Recognition or awards
(4) Job profile and his suitability
(5) Remuneration proposed
(6) Comparative remuneration profile with respect to industry, size of the company, profile of the position and person (in case of expatriates the relevant details would be w.r.t. the country of his origin)
(7) Pecuniary relationship directly or indirectly with the company, or relationship with the managerial personnel, if any.
III. Other information :
(1) Reasons of loss or inadequate profits
(2) Steps taken or proposed to be taken for improvement
(3) Expected increase in productivity and profits in measurable terms.
IV. Disclosures :
(1) The shareholders of the company shall be informed of the remuneration package of the managerial person.
(2) The following disclosures shall be mentioned in the Board of director’s report under the heading “Corporate Governance”, if any, attached to the annual report :
(i) All elements of remuneration package such as salary, benefits, bonuses, stock options, pension etc. of all the directors;
(ii) Details of fixed component and performance linked incentives along with the performance criteria
(iii) Service contracts, notice period, severance fees;
(iv) Stock option details, if any, and whether the same has been issued at a discount as well as the period over which accrued and over which exercisable.
(C) exceeding the ceiling limit of Rs.48,00,000 per annum or Rs.4,00,000 per month calculated on the following scale :-
Where the effective capital of Monthly remuneration payable exceeds Company is (Rupees)
(i) less than rupees 1 crore 1,50,000
(ii) rupees 1 crore or more but 2,00,000 less than rupees 5 crores
(iii) rupees 5 crores or more but 2,50,000 less than rupees 25 crores
(iv) rupees 25 crores or more but 3,00,000 less than rupees 50 crores
(v) rupees 50 crores or more but 3,50,000 less than rupees 100 crores
(vi) rupees 100 crores or more 4,00,000 :
Provided that the ceiling limits specified under this sub-paragraph shall apply, if –
(i) payment of remuneration is approved by a resolution passed by the Remuneration Committee;
(ii) the company has not made any default in repayment of any of its debts (including public deposits) or debentures or interest payable thereon for a continuous period of thirty days in the preceding financial year before the date of appointment of such managerial person;
(iii) a special resolution has been passed at the general meeting of the company for payment of remuneration for a period not exceeding three years;
(iv) a statement along with a notice calling the general meeting referred to in clause (iii) is given to the shareholders containing the following information, namely; –
I. General Information :
(1) Nature of industry
(2) Date or expected date of commencement of commercial production
(3) In case of new companies, expected date of commencement of activities as per project approved by financial institutions appearing in the prospectus.
(4) Financial performance based on given indicators
(5) Export performance and net foreign exchange collaborations
(6) Foreign investments or collaborators, if any.
II. Information about the appointee :
(1) Background details
(2) Past remuneration
(3) Recognition or awards
(4) Job profile and his suitability
(5) Remuneration proposed
(6) Comparative remuneration profile with respect to industry, size of the company, profile of the position and person (in case of expatriates the relevant details would be w.r.t. the country of his origin)
(7) Pecuniary relationship directly or indirectly with the company, or relationship with the managerial personnel, if any.
III. Other information :
(1) Reasons of loss or inadequate profits
(2) Steps taken or proposed to be taken for improvement
(3) Expected increase in productivity and profits in measurable terms.
IV. Disclosures :
(1) The shareholders of the company shall be informed of the remuneration package of the managerial person.
(2) The following disclosures shall be mentioned in the Board of director’s report under the heading “Corporate Governance”, if any attached to the annual report : –
(i) All elements of remuneration package such as salary, benefits, bonuses, stock options, pension etc. of all the directors;
(ii) Details of fixed component and performance linked incentives along with the performance criteria
(iii) Service contracts, notice period, severance fees;
(iv) Stock option details, if any, and whether the same has been issued at a discount as well as the period over which accrued and over which exercisable.
Provided further that the conditions specified in sub-paragraph (C) shall apply in the case the effective capital of the company is negative.
Provided also that the prior approval of the Central Government is obtained for payment of remuneration on the above scale.
(b) after Explanation III, the following Explanations shall be inserted, namely,-
“Explanation IV :- For the purposes of this section, “Remuneration Committee” means that a committee which consists of at least three non-executive independent directors including nominee director or nominee directors, if any.
Explanation V :- For the purposes of this clause, the Remuneration Committee while approving the remuneration under this section, shall,-
(a) take into account, financial position of the company, trend in the industry, appointee’s qualification, experience, past performance, past remuneration etc.
(b) be in a position to bring about objectivity in determining the remuneration package while striking a balance between the interest of the company and the shareholders.
Explanation VI :- for the purposes of Paragraph 1, ” negative effective capital” means the effective capital which is calculated :-
(a) in accordance with the provisions contained in Explanation I of this Part;
(b) less than zero”.
2. It shall come into force on the date of its publication in the official gazette.
(File No. 5/48/2001-CL.V)
Rajiv Mehrishi
Joint Secretary to the Government of India
