(A) Appointment of Managerial Personal (Under Section 196 of the Companies Act (CA) 2013)

1. Introduction on Appointment of Managerial personal

(i) Appointment of Managerial Personal is covered under the section 196 of the CA 2013 and definition of Managerial Personal is covered under section 2(53) + 2(54) of the Companies Act, 2013.

(ii) Managerial Personal is including:

(a) Managing Director (MD)

(b) Whole-time Director (WTD)

(c) Managers

    • MD, WTD and Manager are commonly known as managerial personal

 (iii) Managerial Remuneration + computation of managerial remuneration are covered under section 197 and 198 of the CA, 2013 respectively.

(iv) Appointment of Managerial Personal under section 196 of the CA, 2013 is applicable for the private limited companies + public limited companies (both)

(v) Managerial Remuneration under section 197 and 198 along with Part II of the schedule V of the CA, 2013 are not applicable for the private limited companies

(vi) Managerial Remuneration under section 197 and 198 along with Part I and Part II of the schedule V of the CA, 2013 are applicable for the public limited companies only.

2. Appointment of Managerial personal

(i) Not Permitted appointments as managerial personal

(a) Companies are not permitted to appoint a MD + a Manager (both) at the same time. Hence companies are permitted to appoint either a MD or a Manager at a same time.

(b) Companies are not permitted to appoint or re-appoint a managerial personal for a term exceeding 5 years at a time. Hence re-appointment is permitted for renewal further for a term not exceeding 5 years therefore in multiple of not exceeding 5 years can be appointed even for 50 years.

(c) Companies are not permitted to appoint a managerial personal having age below 21 years or exceeding age 70 years

(d) Companies are not permitted to appoint a managerial personal those are an un-discharged insolvent or have already been adjudged as an insolvent.

(e) Companies are not permitted to appoint a managerial personal those have at any time suspended the payments to their creditors or have any time made the composition with the creditors.

(f) Companies are not permitted to appoint a managerial personal those have at any time already been convicted by the court against an offence + sentenced for imprisonment even for 1 day.

(ii) Permitted appointments as managerial personal

(a) Companies are permitted to appoint a managerial personal having age exceeding 70 years through passing a special resolution in the annual general meeting (AGM) or extra ordinary general meeting (EOGM) with the justification of appointing having age exceeding 70 years.

(b) Companies are permitted to appoint a managerial personal after satisfaction of the provision under section 197 or schedule V of the CA, 2013.

(c) Companies are permitted to appoint a managerial personal with the terms and conditions for appointment + remunerations as duly approved by Board of directors + further approved by an ordinary resolution at the next AGM or EGM

(d) Companies are permitted to appoint a managerial personal with the approval of the Central Govt. where the terms and conditions under section 197 or schedule of the CA, 2013 are different.

(e) Companies are permitted to appoint a managerial personal with the filling of prescribed form (MR-1) with the office of the ROC and also filling period is not exceeding 60 days from the date of appointment

(f) Companies are permitted to appoint a managerial personal and also permitted for the actions as executed till date of the next AGM or EGM where appointment of a managerial personal is not approved by the next AGM or EGM

3. Definition of Managerial Personal

(i) Manager

(a) Definition of the Manager is covered under section 2(53) of the CA, 2013 where an individual is managing 100% or substantially the affairs of a company

(b) Manager is managing under the superintendence, control and direction of the Board of Directors

(c) Manager includes a director or any other person who is occupying the position of a manager with or without a contract of service.

(ii) Managing Director (MD)

(a) Definition of the MD is covered under section 2(54) of the CA, 2013 where MD means a director in accordance to articles of a company or an agreement with the company or through an ordinary resolution passed in next AGM or EGM or by its Board of Directors which is entrusted with substantial powers of management of the affairs of the company.

(b) And also includes a director who is occupying the position of MD by whatever name called.

(iii) Whole Time Director (WTD)

    • Definition of the WTD is covered under section 2(94) of the CA, 2013 where WTD includes a director who is in the whole time employment of   the company. Hence a person who is not a part time director is called WTD

(B) Remuneration of Managerial Personal (Under Section 197 of the Companies Act (CA) 2013)

1. Introduction on Remuneration of Managerial personal

(i) Remuneration of the Managerial Personal by Corporate in India is covered under the section 197 of the CA 2013 + definition of Managerial remuneration is covered under section 2(78) of the CA, 2013

(ii) Remuneration of Managerial Personal is applicable on:

(a) Public Limited Companies

(b) Private Limited Companies which are subsidiaries of Public Limited Companies

(iii) Remuneration of the Managerial Personal is not applicable on Private Limited Companies.

(iv) Permitted routes for managerial remuneration

(a) Automatic Route for managerial remuneration where adequate profits

      • Automatic route for managerial remunerations is permitted where adequate profits are existed + managerial remunerations are not exceeding limits like 11%, 5%, 3% or 1% of the “adjusted” net profits of the companies

 (b) Shareholders’ Approval Route for managerial remuneration

(ba) Shareholders’ Approval Routes is needed through passing an ordinary resolution in the next AGM or EGM for managerial remuneration to the managerial personal where the managerial remuneration is not exceeding the limits as permitted under the section 197 of the CA, 2013 against the adequate profits

(bb) Shareholders’ Approval Route is needed through passing an ordinary resolution in the next AGM or EGM for managerial remuneration to the managerial personal where managerial remuneration is not exceeding the limits as permitted under the part II of the schedule V of the CA, 2013 against the loss or inadequate profits

(bc) Shareholders’ Approval Route is needed through passing an special resolution in the next AGM or EGM for managerial remuneration to the managerial personal where managerial remuneration is not exceeding 200% of the limits as permitted under the part II of the schedule V of the CA, 2013 against the loss or inadequate profits

(c) Shareholders approval route + Central govt. approval route (both)

      • Shareholders Approval Routes + central govt. approval routes (both) are required for managerial remuneration to the managerial personal where the managerial remuneration is exceeding the limits as permitted under the section 197 of the CA, 2013 against the adequate profits + as permitted under the schedule V of the CA, 2013.

Appointment + Remuneration of Managerial Personal by Corporate in India

2. Not Permitted Managerial Remuneration where profits are adequate

(i) Companies are not permitted to pay managerial remuneration to managerial personal exceeding 11% of the adjusted net profits for the financial year as computed in accordance to the provisions as prescribed under section 198 of the CA, 2013.

(ii) (a) Companies are not permitted to pay managerial remuneration to 1 managerial personal exceeding 5% of the adjusted net profits for the financial year as computed in accordance to the provisions as prescribed under section 198 of the CA, 2013 where companies have more than 2 managerial personal

(b) Companies are not permitted to pay managerial remuneration to 2 or more managerial exceeding 10% of the adjusted net profits for the financial year as computed in accordance to the provisions as prescribed under section 198 of the CA, 2013 where companies have more than 2 managerial personal.

(iii) Companies are not permitted to pay managerial remuneration to the non managerial personal commonly known as Independent Directors exceeding 1% of the adjusted net profits as computed under section 198 of the CA, 2013.

(iv) Companies are not permitted to pay managerial remuneration to the non managerial personal commonly known as Independent directors exceeding 3% of the adjusted net profits as computed under section 198 of the CA, 2013 where companies are not having managerial personal.

(v) Companies are not permitted to pay managerial remuneration to the managerial personal exceeding the monetary limits as prescribed in accordance to schedule V of the CA, 2013 where companies have no profits or inadequate profits

(vi) Stock Options to Independent Directors (IDs)

    • Companies are not permitted to allow stock options to the independent directors (IDs). Hence companies are permitted to allow stock options to managerial personal.

(vii) Refund of Extra paid of Managerial Remuneration

Companies are not permitted to waive the recovery of the refund from extra paid managerial remuneration as covered under section 197(9) of the CA, 2013 without approval from the central govt.

(viii) Managerial remunerations where no profits or inadequate profits

(a) Companies are not permitted to pay managerial remunerations where no profits or inadequate profits as exceeding the limit prescribed under schedule V of the CA, 2013 without approval from the central govt.

However companies are permitted to pay managerial remuneration not exceeding 200% with passing a special resolution in the next AGM or EGM. Hence companies are required to obtain an approval from the Central govt where managerial remuneration is exceeding 200%

(b) Companies are not permitted to pay managerial remunerations where no profits or inadequate profits as exceeding the limit prescribed under schedule V of the CA, 2013 without fulfilling of the compliances in accordance to the provisions as already existed in the memorandum, articles, the agreement as enter + an ordinary resolution as passed in the next AGM or EGM

3. Permitted Managerial Remuneration where profits are adequate

(i) Companies are permitted to pay managerial remuneration to managerial personal not exceeding 11% of the adjusted net profits for the financial year as computed in accordance to the provisions as prescribed under section 198 of the CA, 2013 with the provisions of section 197 of the CA, 2013 to pass an ordinary resolution in the next AGM or EGM.

(ii) Companies are permitted to pay the fee commonly known as meeting fee for attending the meetings of Board of directors + management committees without any monetary limits like 11%, 5%, 3% or 1%. Hence companies are permitted to pay the meeting fee over and above the monetary limits like 11%, 5%, 3% or 1%

(iii) Companies are permitted to pay managerial remuneration to the managerial personal exceeding the monetary limits as prescribed in accordance to schedule V of the CA, 2013 + approval from the Central Govt. of India where companies are having no profits or inadequate profits

(iv) (a) Companies are permitted to pay managerial remuneration to the managerial personal in accordance to the provisions as prescribed under section 197 of the CA, 2013 + in accordance to the Article of the companies.

(b) Companies are required to pass a special resolution in the next AGM or EGM where articles of the companies are mandatory requiring of passing special resolution.

(c) Companies are permitted to pay managerial remuneration to the professional for providing professional services where nomination and Remuneration Committee or Board of directors have approved the requisites professional qualification of the directors without any monetary limit like 11%, 5%, 3% or 1%.

(v) Companies are permitted to pay fee for attending the meetings of Board of directors or different committees not exceeding the amount as prescribed for different fees for different class of companies and fee for independent directors.

(vi) Companies are permitted to pay remuneration on monthly basis, on specified percentage of adjusted net profit basis, partly on monthly basis or partly on specified percentage

(vii) Managerial Remuneration to Independent Directors (IDs)

(a) Companies are permitted to pay fee for attending meetings of Board of directors + committees on different matters.

+

(b) Also permitted to pay for reimbursement of expenses against attending meetings of Board of directors + committees on different matters

+

(c) Also permitted to pay percentage of adjusted net profits as commission not exceeding 1% or 3% as case may be. Payment of commission is to be approved by passing an ordinary resolution in the AGM

(viii) Companies are permitted to pay managerial remuneration not exceeding the amount as computed in accordance to the section 198 of the CA, 2013.

(ix) Refund of Extra paid of Managerial Remuneration

(a) Companies are permitted to take a refund of extra paid managerial remuneration from managerial personal which were paid over and above the limits prescribed under section 197 of the CA, 2013

or

(b) Companies have paid the managerial remuneration without approval from the central govt. wherever it’s required.

(c) Companies are permitted to treat amount of refund as managerial personal is holding as a trustee to the companies.

4. Miscellaneous Provisions for Managerial Remuneration

(i) 100% listed companies are required to disclose in the Board report the ratios of remuneration to each directors and other details as prescribed

(ii) Insurance on behalf is not treated as managerial remuneration

(a) Companies are not permitted to treat as managerial remuneration against the amount of insurance premium as paid on behalf of managerial personal for indemnifying against any liability for any negligence, default, misfeasance, breach of duty or breach of trust for the purpose + welfare of the companies.

(b) Companies are permitted to treat as managerial remuneration against the amount of insurance premium paid on behalf of managerial personal for indemnifying against any liability for any negligence, default, misfeasance, breach of duty or breach of trust for the purpose + welfare of the companies where its proved that managerial personal was guilty.

(c) Managerial personals are not to be disqualified from receiving any remuneration or commission from holding company or subsidiary companies where companies have made its disclosure in the Board’s report

(iii) Penalties for contraventions

    • Every person is responsible to pay a minimum penalty 1 lac and maximum penalty 5 lacs for the contravention of the provisions as covered under section 197 of the CA, 2013

(C) Computation of Maximum Managerial Remuneration (Under Section 198 of the Companies Act (CA) 2013)

1. Introduction on Computation of Managerial Remuneration

(i) Now days computation for working maximum mandatory amount of CSR + Managerial remunerations are 2 important calculations being carried out by the corporate in India.

(ii) Section 198 of the CA, 2013 is guiding the companies for computing of adjusted net profit through adding 2 items and subtracting 20 items in the net profit as worked out  in accordance to schedule III of the CA, 2013 as on March 31st each year.

(iii) Companies are required to compute the adjusted net profit through CAs, CSs  ICWA and other professionals to assist the Board of directors to decide the maximum amount of CSR + managerial remuneration.

2. Computation of “Adjusted” Net Profits

(i) Profits in accordance to schedule III of CA, 2013 as on March 31st :

(+)

(a) Amount received as bounties + subsidies from the govt., public authority as constituted or authorized on behalf of govt.

(b) Amount received as profits against sale of fixed assets over and above the written down value (WDV)

(-)

(a) Amount received as premium on shares or debentures against the shares or debentures as issued or sold by the companies

(b) Amount received as profits against forfeiture of shares by the companies

(c) Amount allowed as loss of capital nature including loss on sale of undertaking.

(d) Amount received as profits against sale of immovable property or fixed assets

(e) Amount as being carried out as liability under the head equity reserves including surplus in profit and loss account against measurement of the asset or the liability at fair market value (FMV).

(f) Amount paid as expenses as usual working charges

(g) Amount paid as director’s remuneration

(h) Amount paid as bonus or commission to the staffs

(i) Amount paid as tax notified by the Central Government

(j) Amount paid as tax paid on business profits as imposed by the Central Govt.

(k) Amount paid as interest on debentures

(l) Amount paid as interest on secured loans

(m) Amount paid as interest on unsecured loans and advances

(n) Amount paid as expenses on repairs

(o) Amount paid as contributions under section 181

(p) Amount allowed as depreciation under section 123

(q) Amount paid as excess of expenditure over incomes

(r) Amount paid as compensation or damages against legal liability

(s) Amount paid as insurance premium

(t) Amount as allow debts considered bad and also written off or adjusted

(D) Appointment + Remuneration of Managerial Personal (Under Schedule V of the Companies Act (CA) 2013)

1. Appointment of Managerial Personal (Under Part-I of Schedule-V)

(i) Appointment of managerial personal is permitted without approval of Central govt. subject to satisfaction of certain terms and conditions:

(a) Where the managerial personal have not been sentenced to imprisonment for minimum 1 day or the fine exceeding 1 thousand for the conviction of an offence under any of the followings 21 Acts:

(aa) Fugitive Economic Offenders (FEO) Act, 2018

(ab) Goods and Services Tax (GST) Act, 2017

(ac) Insolvency and Bankruptcy Code (IBC), 2016

(ad) Companies Act (CA) 2013 and 1956

(ae) Prevention of Money-Laundering Act (PMLA), 2002

(af) Competition Act, 2002

(ag) Foreign Exchange Management Act (FEMA) Act 1999

(ah) Securities and Exchange Board of India (SEBI) Act, 1992

(ai) Sick Industrial Companies (Special Provisions) Act, 1985

(aj) Customs Act, 1962

(ak) Income-tax Act, 1961

(al) Wealth-tax Act, 1957

(am) Securities Contracts (Regulation) Act, 1956

(an) Essential Commodities Act, 1955

(ao) Prevention of Food Adulteration Act, 1954

(ap) Industries (Development and Regulation) Act, 1951

(ar) Central Excise Act, 1944

(as) Foreign Trade (Development and Regulation) Act, 1922

(at) Indian Stamp Act, 1899

(b) Where the person had not been detained for minimum 1 day under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974.

      • Central Govt. approval is not needed for subsequent appointment where original appointment was made with the approval of the central govt. against conviction or detention.
      • Central Govt. approval is needed for subsequent appointment where original appointment was made with the approval of the central govt. against conviction or detention but the person has further convicted or detained after the approval of central govt. for appointment of managerial personal.

(c) (ca) Where the person has completed the age of 21 years or not attained the age of 70 years

(cb) Approval from the central govt. is not required for age exceeding 70 years where company has passed a special resolution at the next AGM or EGM.

(d) Where the managerial personal is appointed + drawing remuneration from 1 or more companies not exceeding the monetary ceiling as provided under section V of Part II

(e)Where the person is non resident of India + certain terms and conditions are to be satisfied for treating a resident of India as under:

(ea) Where the person is staying in India for minimum 12 months from immediate preceding to the date of his appointment as managerial personal + the person is staying with VISA for taking employment or carrying on a business or vocation in India.

      • Above mentioned condition is not applicable to the companies as conducting business in special economic zones (SEZ) as notified by the deptt. of commerce.
      • Non resident of India is permitted to enter in India after obtaining a proper employment VISA from the Indian mission outside India.

2. Remuneration of Managerial Personal (Under Section-I of Part-II of Schedule-V)

(i) Remuneration by companies having adequate profits (Under Section I of Part II, of Schedule V of the CA, 2013)

    • Companies are permitted to pay managerial remuneration to the managerial personal within the prescribed limit like 11%, 5%, 3% or 1% under section 197 of the CA, 2013

(ii) Remuneration by companies having no profits or inadequate profits (Under Section II of Part II, of the Schedule V of CA, 2013)

    • Companies are permitted to pay managerial remuneration to the managerial personal within the following limits

SL. No.

Amount of effective capital Maximum Remuneration for Managerial Personal Maximum Remuneration for Non Managerial Personal like part time director + Independent director
(a) Where losses or profits are not exceeding 5 crores. 60 lakhs 12 Lakhs
(b) Where profits are not exceeding 100 crores. 84 lakhs 17 Lakhs
(c) Where profits are not exceeding 250 crores. 120 lakhs 24 Lakhs
(d) Where profits are exceeding 250 crores. 120 lakhs + 0.01% of effective capital where profits are exceeding 250 crores 24 Lakhs + 0.01% of effective capital where profits are exceeding 250 crores
    • Companies are permitted to pay managerial remuneration not exceeding 200% the above mentioned monetary ceiling where the companies have passed a special resolution in the next AGM or EGM
    • Companies are permitted to pay managerial remuneration on proportionate basis where the managerial personal is appointed for the period less than 1 year.

3. Remuneration of Managerial Personal working in professional capacity (Under Section-II of Part-II of Schedule-V)

(i) (a) Companies are permitted to pay the remuneration to the managerial personal working in a professional capacity + managerial personal is not having any interest in the capital of the company or its holding company or any of its subsidiaries as directly or indirectly or through any other statutory structures

+

(b) Managerial personal as working in a professional capacity is not having any direct or indirect interest or related to the directors or promoters or its holding company or its subsidiaries at any time during the last 2 years before or on or after the date of appointment + possesses minimum graduate level qualification along with the expertise + specialized knowledge in the field where company is working.

  • Managerial personal working in a professional capacity is not having any interest in the capital of the company includes:

(a) Where managerial personal is holding not exceeding 0.5% of its paid up share capital under any scheme as formulated for allotment of shares to the managerial personal including Employees Stock Option Plan (ESOP) or by way of qualification is deemed to be a managerial personal not having any interest in the capital of the company

(b) Where companies have approved the payment of remuneration as approved through an ordinary resolution as passed by the Board of directors or by the nomination and remuneration committee where formation of nomination and remuneration committee is mandatory under section 178 (1) of the CA, 2013

(c) (ca) Where companies have not committed any default in payment of dues to the banks, public financial institution, non convertible debenture holder or any other secured creditors

+

(cb) Companies are required to obtain no objection certificate (NOC) from the lenders before passing an ordinary resolution in the next AGM and EGM where companies have defaulted in payment of dues to the lenders.

(iii) Companies are required to pass an ordinary or a special resolution as case may be for payment of remuneration in the next AGM or EGM for a period not exceeding 3 years.

4. Remuneration to Managerial Personal having no Profits or inadequate Profits (Under Section-III of Part-II of Schedule-V)

(i) Companies are permitted to pay the managerial remuneration to the managerial personal having no profits or inadequate profits in excess of limits as permitted under section I and II of the part II of the schedule V subject to satisfaction of certain terms and conditions:

(a) Where the companies including the foreign companies have passed a special resolution in the next AGM and EGM where remuneration is being paid in excess of the limits as specified in Section I or Section II of Part II of the Schedule V

+

(b) Companies are required to treat the amount as paid as managerial remuneration in accordance to the section 197 and exceeding the 100% managerial remuneration as paid to the managerial personal is to be treated as within permissible limits under section 197.

(ii) Special circumstances for payment of excess managerial remuneration

(a) Where the companies are newly incorporated and also the excess managerial remuneration is not permitted for exceeding 7 years from the date of incorporations

(b) Where the companies are sick + schemes of revival or rehabilitation have been ordered by the Board for Industrial and Financial Reconstruction (BIFR) for the period not exceeding 5 years from the date of sanction of scheme of revival

(c) Where the resolutions plans have been approved by the National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy Code (IBC) 2016 (31 of 2016) for the period not exceeding 5 years from the date of approval of resolution plan.

(d) Where managerial remuneration have been fixed by the BIFR or the NCLT

(e) Additional conditions to be satisfied :

(ea) Statutory auditors, Company Secretary appointed as employees by the companies or the company secretaries as engaged in whole-time practice (WTP) are required to certify that 100% secured creditors + terms lenders have stated in writing that 100% secured creditors + terms lenders  have no objection for the appointment of the managerial person + the quantum of remuneration and also the certificates are to be filed along with the returns as prescribed under sub-section 196 (4) for appointment + remuneration to the managerial personal.

(eb) Statutory auditors, Company Secretary appointed as employees by the companies or the company secretaries as engaged in whole-time practice (WTP) are required to certify that 100% payments have been settled on time to the 100% creditors + depositors and also the certificates are to be filed along with the returns as prescribed under sub-section 196 (4) for appointment + remuneration to the managerial personal.

5. Perquisites included in Managerial Remuneration (Under Section-IV of Part-II of Schedule-V)

(i) Perquisites are treated as managerial remuneration

(a) Value of rent-free accommodation as provided by the employers.

(b) Value of concession rent as provided by the employers.

(c) Value of benefits or amenities as granted or provided at free of cost or at concessional rate to the managerial personal those are having substantial interest in the companies except certain exceptions.

(d) Actual amount paid by the employers against the obligations of the managerial personal.

(e) Actual amount paid by the employers against an assurance on the life or paid for the contracts of annuities of the managerial personal.

(f) Value of the securities, sweat equity shares as allotted or transferred by the employer or former employer.

(g) Actual amount paid by the employers as contribution against an approved superannuation fund not exceeding Rs 1 lac. This provision is applicable from the year ending on March 31, 2010.

(h) Value of the other fringe benefits or amenities as may be prescribed under the CA, 2013

(i) Actual amount paid for the insurance, pension, annuity or gratuity for self, spouse and children’s.

(ii) Perquisites are not treated as managerial remuneration

  • Perquisites not treated as managerial remuneration to managerial personal as resident of India

(a) Perquisites as contribution to provident fund (PF), superannuation fund or annuity fund as singly or put together. These perquisites are also not taxable under the ITA, 1961

(b) Perquisites as gratuity paid not exceeding 15 days salary per year against the completed years of service where month is treated for 26 days instead of 30 days. This perquisite is also not taxable under the ITA, 1961

(c) Perquisites as leave encashment at the end of contracted term of employment (tenure). This perquisite is also not taxable under the ITA, 1961

  • Perquisites are not treated as managerial remuneration to expatriate + NRIs as managerial personal

(a) Perquisites as Children’s education allowance (CEA) not exceeding Rs. 12000 per month and per child or actual expenses incurred whichever is lower where children’s are staying outside India. CEA is not permitted for more than 2 children’s.

(b) Perquisites as return Holiday passage not exceeding once in a year in economic class or once in 2 years in first class where children’s are staying outside India and also not residing in India.

(c) Perquisites as Leave travel concession (LTC) Return passage for self and family in accordance with the rules as specified by the companies where it is proposed that the leave be spent in home country instead of anywhere in India.

6. Definitions for Managerial Remuneration to Managerial Personal (Under Section-IV of Part-II of the Schedule-V)

(i) Definition of effective capital

(a) Aggregate of the paid-up share capital excluding share application money or advances against shares if any.

+

(b) Share premium account reserves and surplus excluding the revaluation reserve + long-term loans + deposits as repayable after 1 year but excluding working capital loans, overdrafts, interest due on loans, bank guarantees, etc.

(c) Other short-term arrangements aggregate of the investments excluding the investments as made by the investment companies those are having principal business as acquisition of shares, stock, debentures or other securities – accumulated losses and preliminary expenses not written off.

(ii) Exemptions from effective capital

(a) Effective capital is to be computed as on the date of incorporations of new companies for the appointment of managerial personal in the year in which new companies have been incorporated.

(b) Effective capital is to be computed as on the last date of the financial year preceding the financial year in which the appointment of managerial personal is made.

(iii) Definition of family

    •  Its includes the spouse + depended children’s + depended parents of the managerial personal

(iv) Functions of nomination and remuneration committee

    • The nomination and remuneration committee is required to approve the managerial remuneration as covered under section II and III of part-II of schedule-V of the CA, 2013 with the following criteria’s:

(a) The nomination and remuneration committee is to take in consideration the financial position of company + the followings:

(aa) Trends in the industry

(ab) Appointee’s qualification

(ac) Experience

(ad) Past performance

(ae) Past remuneration etc.

(b) The nomination and remuneration committee is required to maintain a balance between the interest of the companies and shareholders along with objectivity in determining the remuneration package.

(v) Definition of negative effective capital

    • Negative effective capital is to be treated where net capital is less than zero

(vi) Definition of Managerial Remuneration

    • Definition of the managerial remuneration is defined under section 2(78) of the CA, 2013 + reimbursement of the direct taxes to the managerial personal

(viii) Maximum Managerial Remuneration from 2 companies (Under section V of Part II of schedule V of the CA, 2013)

    •  Managerial personal is permitted to take managerial remuneration from 2 companies where the total remunerations are not exceeding the higher maximum limit as permitted from any 1 out of the 2 companies.

(E) Conclusion on Appointment + Remuneration (Under Section 196, 197, 198 and schedule V of the CA, 2013)

1. Conclusion on appointment of managerial personal (Under Section 196 of the CA, 2013)

(i) Appointment of Managerial Personal is permitted through passing of a resolution in meeting of Board of directors or in the meeting of nomination and remuneration committee wherever applicable under section 178 (1) of the CA, 2013

+

(ii) Passing of an ordinary resolution in the next AGM or EGM for appointment of permitted managerial personal.

+

(iii) Approval from the Central of India for appointment of not permitted managerial personal.

2. Conclusion on remuneration of managerial personal against adequate profits (Under Section 197 of the CA, 2013)

(i) Remuneration of Managerial Personal is permitted against adequate profits through passing of a resolution in meeting of Board of directors or in the meeting of nomination and remuneration committee wherever applicable under section 178 (1) of the CA, 2013

+

(ii) Passing of an ordinary resolution in the next AGM or EGM for remuneration of managerial personal.

+

(iii) Approval from the Central Govt. of India for remuneration as exceeding the monetary limits are prescribed under section 197 of the CA, 2013 like 11%, 5%, 3% and 1%.

3. Conclusion on remuneration of managerial personal against inadequate profits (Under Schedule V of the CA, 2013)

(i) Remuneration of Managerial Personal is permitted against no profits or inadequate profits through passing of a resolution in meeting of Board of directors or in the meeting of nomination and remuneration committee wherever applicable under section 178 (1) of the CA, 2013

+

(ii) (a) Passing of a ordinary resolution in the next AGM or EGM for remuneration as not exceeding 100% of the monetary limits are prescribed under schedule V of the CA, 2013

or

(b) Passing of a special resolution in the next AGM or EGM for remuneration as not exceeding 200% of the monetary limits are prescribed under schedule V of the CA, 2013

+

(iii) Approval from the Central Govt. of India for remuneration as exceeding 200% of the monetary limits are prescribed under schedule V of the CA, 2013.

******

(Author can be reached at email address [email protected] or on Mobile No. 9811081957)

Disclaimer :  The contents of this article are solely for informational purpose. Neither this article nor the informations as contained herein constitutes a contract or will form the basis of a contract. The material contained in this article does not constitute or substitute professional advice that may be required before acting on any matter. While every care has been taken in the preparation of this article to ensure its accuracy at the time of publication. Satish Agarwal assumes no responsibility for any error which despite all precautions may be found herein. We shall not be liable for direct, indirect or consequential damages if any arising out of or in any way connected with the use of this article or the informations as contained herein.

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