What is ‘managerial Remuneration’?

Managerial remuneration means remuneration paid to managerial personnel like directors, managing directors, whole-time directors and manager.

Overall Managerial Remuneration payable:

The overall maximum managerial remuneration payable by a public company u/s 197 of companies act, 2013, shall not exceed 11% of net profit for that financial year.

Provided that, company can pass a special resolution in general meeting for payment of managerial remuneration more than 11% of the net profit.

Overall Managerial Remuneration payment criteria:-

Category Maximum Permissible Managerial Remuneration
Whole-Time Director (One) 5%
Managing Director (One) 5%
Manager (One) 5%
Whole-Time Director (more than one) 10%
Managing Director (more than one) 10%
Managing Director, Manager with one or more Whole-Time Director 10%
Overall Limit for Total Managerial Remuneration to all Managerial Personnel 11%
Part Time Director with one or more Whole-Time Director or Managing Directors 1%
Part Time Director without Whole-Time Director or Managing Directors 3%

Further, if a public company defaults in payment of dues to any bank / public financial institution / non-convertible debenture holders / any other secured creditor, such company would be required to obtain prior approval of such bank / public financial institution / non-convertible debenture holders / any other secured creditor, as the case may be, before obtaining the shareholders’ approval.

If, in any financial year, a company has no profits or its profits are inadequate, the company shall not pay remuneration to its directors, including any managing or whole-time director or manager not exceeding, the limits are as under:-

Where the effective capital is Limit of yearly remuneration payable shall not exceed (Rupees)
Negative or less than 5 crores 60 Lakhs
5 crores and above but less than 100 crores 84 Lakhs
100 crores and above but less than 250 crores 120 Lakhs
250 crores and above 120 lakhs plus 0.01% of the effective capital in excess of Rs. 250 crores:

Above remuneration can be paid in the case of inadequate or no profits, only after obtaining approval of the shareholders by a special resolution.

Any remuneration received by any director / managerial personnel in excess of the statutory limits without obtaining the approval from the shareholders, must be refunded to the company, within two years or such lesser period as may be allowed by the company, and until such sum is not refunded, such director / managerial personnel would continue to hold it in trust for the company. Any waiver of such refund must be approved by the shareholders by a special resolution within two years from the date the sum becomes refundable.

Disclaimer: The entire contents of this article are solely for information purpose and have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation. It doesn’t constitute professional advice or a formal recommendation. The author has undertaken utmost care to disseminate the true and correct view and doesn’t accept liability for any errors or omissions. You are kindly requested to verify & confirm the updates from the genuine sources before acting on any of the information’s provided herein above.

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Qualification: CS
Company: RJ Group
Location: Maharashtra, IN
Member Since: 09 Feb 2019 | Total Posts: 1

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One Comment

  1. Chandranil Belvalkar says:

    Hello,

    In the above article nicely covers % slabs. however in case of inadequate profits as per schedule V if remuneration is within limit as per schedule then ordinary resolution can be passed and no special resolution is required

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