Applicability:
On all Public Companies
This section prescribes ceiling on managerial
remuneration as also for managerial remuneration in case of inadequacy of
profits.
CEILING
ON MANAGERIAL REMUNERATION:
The overall limit on managerial remuneration is 11% of the Net Profits.
The company in the annual general meeting with the
approval of Central government may authorise payment of remuneration exceeding 11% of the Net Profits, subject to the provisions of Schedule V of the Act.
1.
Remuneration payable to any 1 Managing Director / Whole
Time Director / Manager shall not exceed 5% of the Net Profits of the Company,
and if there is more than one such director, remuneration shall not exceed 10% of the Net Profits to all such Directors and Manager taken together.
2.
The remuneration payable to other directors shall not
exceed 1% of the Net Profits, if there is a MD/WTD/Manager; 3% of the Net Profits in any other case.
COMPANY
WITH NO PROFITS / INADEQUATE PROFITS: In any financial year, if the company has no profits
or inadequate profits, the company shall not pay to its directors including any
managing or whole time director by way of remuneration any sum exclusive of sitting fees payable to
directors except in accordance with Schedule V, and if it is not able to
comply with such provisions, with the previous approval of the Central
Government.
REMUNERATION
PAID IN ANY OTHER CAPACITY: Remuneration payable to directors including Managing
Director, Whole Time Director or manager in any other capacity is exempt if
it is in respect of professional nature, and in the opinion of the Nomination and Remuneration
Committee (if applicable) or the Board of Directors, the director possesses the
requisite qualification for the practice of the profession.
PAYMENT
OF SITTING FEES: A company may pay sitting fees to a director for
attending the Board meeting or Committee meetings, for such sum as may be
decided by the board not exceeding Rs. 1lac per
board/committee meeting.
1.
In case of Independent Director / Women Director, the
sitting fees shall not be less than the fees payable to other directors.
2.
Independent Director may receive remuneration by way of
sitting fees, reimbursement of expenses for participation in the Board or other
meetings, and profit related commission as may be approved by the
members. He shall not be entitled to
stock options.
REMUNERATION
BY WAY OF MONTHLY PAYMENT: A director or manager (excluding Whole Time Director
and Managing Director) may be paid remuneration either by way of a monthly
payment or at a specified percentage of Net Profits of the Company or partly by
one way and partly by another.
RECEIPT
OF COMMISSION: Any director who is in receipt of any commission from
the company and who is a Managing Director or Whole Time Director of the
Company shall not be disqualified from receiving any remuneration or commission
from any holding or subsidiary company of such company, provided disclosure is
made in the Board Report.
REMUNERATION
IN EXCESS OF LIMITS: If any director draws remuneration in excess of the
limits prescribed or without the approval of Central Government, he shall
refund such sums to the company.
DISCLOSURE
IN BOARD REPORT: Every Listed Company shall disclose in the Board Report
the ration of remuneration of each director to the median remuneration as
prescribed in Rule 5 of Companies (Appointment
and Remuneration of Managerial Personnel) Rules, 2014.
NOTE ON
INSURANCE PREMIUM: if any insurance premium is taken by the company on
behalf of its Managing Director, Whole Time Director, Manager, CEO, CFO or CS
for indemnifying any of them against any liability in respect of any negligence,
default, misfeasance, breach of duty or trust for which they may be guilty in
relation to the company, the premium paid on such insurance shall
not be treated as part of remuneration payable to such personnel.
However,
if the person is proved to be guilty, the premium paid on such insurance shall
be treated as part of remuneration.
References:
Companies Act,
2013
MCA
Contact:
CS Divyanshu
Bansal
Email ID: divyanshubansal401@gmail.com
