Introduction: In accordance with the Companies Act, 2013, the appointment and remuneration of Managing Directors (MD), Whole-Time Directors (WTD), and Managers are subject to specific regulations and disqualifications. Understanding these provisions is crucial for compliance and effective governance within companies. Let’s delve into the key aspects governing the roles and remuneration of MDs, WTDs, and Managers under the Companies Act, 2013.
- DISQUALIFICATIONS OF MD/ WTD/ MANAGER:
> Below the age of 21 and above the age of 70 years (If SR passed = waived)
> undischarged insolvent
> in the past suspended payment to creditors
> Convicted for more than 6 months
- Term of appointment of MD = 5 year & then 1 year cooling period (File Form MR-1 within 60 days from the date of appointment)
- Section-203 of the act read with rule-8 of Companies (Appointment & Remuneration of managerial personnel) Rules, 2014 mandates the appointment of KMP for
> every listed company and Public Companies with paid up capital of 10 crore or more
a) managing director, or Chief Executive Officer or manager and in their absence, a whole-time director;
b) company secretary; and
c) chief financial officer
- Rule-8A mandates all the private company with paid up capital of 10 crore or more to appoint whole time company secretaries
- Public companies having
a) Paid up share capital of 100 crore or more and
b) Annual turnover of 1000 crore or more,
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- Which are engaged in multiple businesses and have appointed Chief Executive Officer for each such business can appoint an individual as Chairperson and Managing Director.
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- MANAGERIAL REMUNERATION (SECTION 197):
> Public company can maximum give remuneration to all directors shall not exceed 11 % of net profit of the company.
> Remuneration payable to MD/WTD shall not exceed 5 % of the net profit of the company.
a) If Company has more than 1 MD/WTD, remuneration to then shall not exceed 10 % of net profit of the company.
> Remuneration payable to director other than MD/WTD shall not exceed
a) If company has MD/WTD = 1% of net profit of the company
b) If company has No MD/WTD = 3% of net profit of the company
- Remuneration paid above this limit shall require approval of shareholders by the way of SR passed in general meeting. (NO CG approval required)
- Sitting fee for the attendance of any BOD or Committee meeting shall not exceed 1 lakh rupees.
- For the purpose of managerial remuneration net profit shall be calculated as per the section 198 of the companies act, 2013
- Any excess remuneration drawn shall be repaid within 2 year or lesser period as may be allowed by the company by such director.
> The company can waive it by passing special resolution.
- Company shall file Form DIR-12 and Form MGT-14 within 30 days from the date of appointment of company secretary.
- If Vacancy in the appointment of CS, then fill up within 6 months from vacancy.
| Where the effective capital (in rupees) is | Limit of yearly remuneration payable shall not exceed (in Rupees) in case of a managerial person | Limit of yearly remuneration payable shall not exceed (in rupees) in case of other director |
| Negative or less than 5 crore | 60 lakhs | 12 lakhs |
| 5 crore and above but less than 100 crore | 84 lakhs | 17 lakhs |
| 100 crore and above but less than 250 crore | 120 lakhs | 24 lakhs |
| 250 crore and above | 120 lakhs plus 0.01% of the effective capital in excess of Rs.250 crore | 24 Lakhs plus 0.01% of the effective capital in excess of Rs.250 crore |
Conclusion: The Companies Act, 2013 outlines stringent regulations concerning the appointment and remuneration of Managing Directors, Whole-Time Directors, and Managers. From disqualifications to remuneration limits based on company size, adherence to these provisions is essential for corporate governance and regulatory compliance. Understanding and implementing these regulations ensure transparency, accountability, and effective management within companies operating under the purview of the Companies Act, 2013.
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