APPOINTMENT & REMUNERATION
OF MANAGERIAL PERSONNEL
13th March, 2015
By
CA P V N P Sharma
+91 99083 64410
pvnp.sarma@hytechseed.in
CS Vasudeva Rao Devaki
+91 9989345999
dvrao@dvraoassociates.com
Managerial
Personnel
Appointment
2
DEFINITIONS:
 Sec
2(53) “Manager” – Same as CA 1956 – Same as before.
means an individual who, subject to the superintendence, control
and direction of the Board of Directors, has the management of the
whole, or substantially the whole, of the affairs of a company, and
includes a director or any other person occupying the position of a
manager, by whatever name called, whether under a contract of
service or not;
3
DEFINITIONS:
2(54) “Managing Director” means a director who, by virtue of
 the Articles of a Company or
 an agreement with the company or
 a resolution passed in its general meeting, or
 by its Board of Directors,
 is entrusted with substantial powers of management of the
affairs of the company and includes a director occupying the
position of managing director, by whatever name called.
 Under CA 1956, MD can be appointed through MOA, which is
not allowed in NCA.
 Under CA 1956, “Powers which would not otherwise
exercisable by him was also included”, which now removed.
 Sec
4
5
DEFINITIONS


Sec 2 (94) “Whole-time Director”
includes a Director in the wholetime employment of the company;
Under CA 1956, WTD was not
defined.
2 (52) “Listed Company ” means a company which has any of
its securities listed on any recognized stock exchange.
 Sec 2 (81 ) “securities” means the securities as defined in clause (h
) of section 2 of the Securities Contracts (Regulation) Act, 1956;
Points for Discussion:
 MD has to be a Director for his appointment; whereas
Manager or WTD inclusive def (could be director or any
other person)?????
 Sec
Managerial Personnel – Appointment
Applicable Sections/Rules
Definitions
Sec 2 (53) – Manager
Sec 2 (54) – MD
Sec 2 (94) - WTD
Sec 196 – Appt. of MD / WTD or Manager
 Companies (Appt and Remuneration) Rules, 2014
Part I of Schedule V
6
7
APPOINTMENT – SECTION 196
 This Section is applicable to both Public & Private Company.
 A Company can appoint either Managing Director or Manager
but not both at a time.
 Term shall not exceed five years at a time.
 Re-appointment can be done before the term expires, which
however shall not be earlier than one year of current term expiry.
(under CA 1956, it was 2 Years).
 What is the effective date of Appointment in such cases??
Disqualifications – Under Sec 196
 Age
shall be above 21 Years, but not above 69
Years
 Under CA 1956, it was 25 years (Schedule XIII)
 In case of above 69 years, Shareholders consent
by Special Resolution
 Un-discharged
insolvent or has at any time been
adjudged as an insolvent;
 Has
at any time suspended payment to his
creditors or makes, or has at any time made, a
composition with them; or
 Has
at any time been convicted by a Court of an
offence and sentenced for a period of more than six
months.
8
Disqualifications – Points for Discussion
 Under
CA 1956, Convicted Offence should
involve moral turpitude, which is not
required under CA 2013
 Under NCA, sentence shall be exceeding 6
months, which was not the case under CA
1956. Therefore, office convicted for less
than 6 Months, is eligible for appointment.
 Under the CA 1956, for Manager, these
disqualification, occurred during preceding 5
years are relevant, which is not the case now.
 Whether Section 164 applicable to Manager
and Whole time Director ????
9
Definition of Court – Sec 2 (29)

The High Court having jurisdiction in relation to the place
at which the registered office of the company concerned is
situate, except to the extent to which jurisdiction has been
conferred on any district court or district courts subordinate
to that High Court under sub-clause;

The district court, in cases where the Central Government
has, by notification, empowered any district court to
exercise all or any of the jurisdictions conferred upon the
High Court, within the scope of its jurisdiction in respect of
a company whose registered office is situate in the district;

The Court of Session having jurisdiction to try any offence
under this Act or under any previous Company Law;

The Special Court established under section 435;

Any Metropolitan Magistrate or a Judicial Magistrate of the
First Class having jurisdiction to try any offence under this
Act or under any previous company law;
10
+ Points for Discussion
1
• Is the person restrained to become MD /
WTD / Manager, if he has been convicted by
the any other High Court, other than the High
Court of the state in which Regd. Office is
situated ??
2
• If the answer to the above point is NO, then if
the Registered Office of the Company shifted
to the state in which he was convicted. What
is the sanctity of his position or his
appointment ??
11
PART- I OF SCHEDULE- V – CONDITIONS
 The Conditions are almost same as was
there before, except the following:
 In addition to the 15 specified Acts The
Prevention of Money – Laundering Act,
2002 is added.
 He is Resident of India.
a) For taking up employment in
India; or
b) For carrying on a business or
vacation in India
12
Imp Points
 Board
& General Meeting Notice shall
include:
 Terms and Conditions of such Appointment
 Remuneration payable
 Interests of other Directors in such
appointment, and
 Other Matters
Additional Compliance –Listed Companies

Send 6 Copies of the notices to SE.

Submit the proceedings of GM to SE
13
PROCESS OF APPOINTMENT
Consent Letter from the Appointee
Declaration from the Appointee that he
Satisfies all the conditions of Part I
Schedule V
Declaration from Appointee he is eligible
to be MD / WTD / Manager
Remuneration
and
Compensation
Committee should recommend to the Board
about the Terms and Condition of such
appointment
Board Resolution for the Appt. and also to
the Terms and Condition of such
Appointment
14
PROCESS OF APPOINTMENT
Filing of Forms with ROC,
Form MGT-14 (in case of MD) – 30 days
Form MGT-14 (in case KMP provisions
applies) - 30 days
MR-1 – Return of Appointment (No Approval
Route) – 60 days
DIR-12 – Change of Designation of the
appointee – 30 days
MR-2 – Application to CG (Approval Route) –
90 days
Shareholders Consent for the Appointment
File MGT-14 (Post AGM/EGM) – 30 days
Update Register of Directors
15
Managerial
Personnel –
Remuneration
16
Managerial Personnel – Remuneration
Applicable Provisions
Sec 2 (78) - Definition of Remuneration
Sec 197 - Overall Maximum Remuneration
Sec 198 - Calculation of profits
Sec 199 - Recovery of Remuneration
Sec 200 - Central Government Powers
Companies (Appt. and Remuneration) Rules, 2014
Part II of Schedule V
17
18
REMUNERATION [Sec. 2(78)]
Means any money or its equivalent given or
passed to any person for services rendered by
him and includes perquisites as defined under the
Income –Tax Act , 1961 (43 of 1961).
For purpose of Schedule V it also include reimbursement of any direct
taxes to the managerial person.
Under CA 1956, there was no clarity, in case of No Profits or in adequate
Profits, whether they are entitle for Commission, but now it is very
broad. It is looks like, he is entitle for commission, provided it is within
the limits.
From the definition it infers that any kind of cost to the company
incurred on his behalf is covered under Remuneration.
It includes money transferred to third party on his behalf.
19
Total managerial remuneration payable by a public company in
a financial year
Not exceeding 11% of net profit of the
company
To MD / WTD or Manager
If there is one MD
or WTD or
Manager
If there is more
than one MD or
WTD or Manager
Maximum 5% of
net profit
Maximum 10% of
net profit
To other directors
When there is
no MD or WTD
or Manager
Maximum 3% of
net profit
When there is
MD or WTD or
Manager
Maximum 1%
of net profit
+ Points to be Noted
1
• When Company wants to pay remuneration
exceeding 5% or 10%, as the case may be, is
considered is a situation of inadequate profits. Is
it correct??
2
• In case of no profit or inadequate profit, then it
should be in accordance with Schedule V OR
3
• With Previous Approval of Central Government,
if the proposed remuneration is beyond Part II of
Schedule V Limits. [Sec.197(11)]
20
Calculation of Net Profit- Section 198
Net Profit for Sec 197 shall be
computed as per method given in Sec
198.
Note: Previously in CA, 1956 there was no
provision regarding “any change in carrying
amount of an asset or of a liability recognized
in equity reserve including surplus in profit
and loss account on measurement of the asset
or the liability at fair value”, But now such
amounts should not be taken into
consideration, while calculating the net profits.
21
Application
to CG
22
23
APPLICATION TO CG – SEC 201
 Applicable
to all Listed Companies or Subsidiary of Listed
Company, who fail to comply Schedule V conditions
 Applicable
to un-Listed Companies, if fail to comply with the
conditions specified in Rule Number 7 of Chapter XIII.
 Please
note that the disqualifications specified in Section 196 are
Prohibitary, therefore, even CG has no power to waive, But same
is not the case for the conditions specified in Part I of Schedule V
 Application
 Other
shall be made within 90 days of Appointment.
documents as sought in the Form MR-2
24
ADDITIONAL
INFORMATION–
CG APPLICATION
Additional Information to be provided to Central Government for
obtaining their consent either for Appointment or Remuneration (Section
200)
 The financial position of the company;
 The remuneration or commission drawn by the individual concerned in
any other capacity;
 The remuneration or commission drawn by him from any other
company;
 Professional qualifications and experience of the individual concerned;
 Such other matters as may be prescribed.
25
ADDITIONAL
INFORMATION–
CG APPLICATION
The
CG or Company shall have regard to the following matters.,
namely:
 the financial and operating performance of the company in last
preceding 3 years.
 Relationship b/w remuneration and performance .
 The principle of proportionality of remuneration, by a rating
methodology compare remuneration of directors to that of other
directors and employees or executives.
 If any differences is there between remuneration policy for directors
and other employees, then explanation for same.
 Securities held by directors, including option and details of share
pledged at the end of preceding FY.
26
APPLICATION TO CG – SEC 201
POINTS TO BE NOTED:
 The
Application shall be made within 90 days of Appt. (i.e., from
the date of Board Meeting), however Shareholders Resolution
details is a mandatory attachment for MR-2. Therefore, Company is
forced to file MR-2 only after the Shareholders Approval.
 Further
the Filing Fee for MR-2 is Rs. 20,000/-
27
UNLISTED COMPANIES
– EXEMPTIONS
IN THE EVENT OF NO PROFIT OR INADEQUATE PROFIT
1) Now Unlisted Companies can pay Remuneration without CG
Approval, beyond ceiling specified in Section II, Part II of
Schedule V, subject to the following conditions :i. Remuneration is approved by the Board and Remuneration
Committee, if applicable,
ii. The shareholders Special Resolution for a period of 3 years;
iii. Clear reason and justification for payment of remuneration
beyond the said limit shall be recorded;
28
UNLISTED COMPANIES –
EXEMPTIONS
IN THE EVENT OF NO PROFIT OR INADEQUATE PROFIT
i. The Company not made any default for a continuous period of 30
days in the preceding FY before the date of payment;
 Repayment of any of its debts (including Public Deposits) or
debentures or interest thereon
 Repayment of preference shares and dividend thereon
ii. Necessary disclosures in the Explanatory Statement including
reasons and justification for payment of remuneration beyond the
said limit;
iii. The company has filed Balance Sheet and Annual Return which
are due to be filed.
OTHER EXEMPTED
29
COMPANIES
PART- II SECTION- III OF SCHEDULE- V:
IN CASE OF INADEQUATE OR NO PROFIT
In these cases, the company may pay remuneration in excess of
Section ii, Provided:
a) Excess Limit is paid by any Other Company and that other
company is either:
 A Foreign Company or
 Other Company, which got the its Shareholders approval and
 It should treats this excess amount as part of Managerial
Remuneration of its Company for the purpose of Section 197.
b) Newly Incorporated Company, for a period of 7 Years from the
DOI, or
c) The Sick Company for five years from Sanction of scheme of
revival, subject to compliance of specified conditions in Schedule V
30
SEZ
APPOINTMENT
a) Resident in India Condition does not
applicable for SEZ Companies. Therefore,
even a Foreigner, who does not have
employment visa can be appointed as
Managerial Personnel.
REMUNERATION:
a) An unlisted SEZ Company can pay upto
Rs. 2.40 Crores (PA) without CG
Approval, Subject to the conditions
specified
31
SITTING FEES
Now any Company can pay Sitting Fees upto Rs. 1.00 Lakh per
meeting.
This sitting Fee provisions are applicable for both Board or
Committee Meetings.
Act is indirectly restricting the Company to pay Sitting Fee beyond
Rs. 1.00 Lakh, as CG Approval requirement no more available.
Since it is covered in the rules, which can be modified by the MCA
as and when needed.
Listing Agreement is silent about amount of Sitting Fee
The Sitting Fees is not part of the Maximum Managerial
Remuneration of 11% of Net Profits (Sec.197).
32
SITTING FEES
Sitting fees to ID & WD shall not be less than the Sitting Fee
payable to other Directors. [Rule 4 of Chapter Companies Appointment
and Remuneration rules 2014]
Different Sitting Fee for different Classes of Companies shall be
as may be prescribed. However, there is no specific rule to define
the Class of Companies. Therefore, the presumption as of now is
that any Company can pay Sitting Fee, as they decides, but upto
a maximum of Rs. 1.00 Lakh) (Sec 197 (5))
Directors attending through VC is entitled to Sitting Fee ???
33
Remuneration For Services Rendered
In Professional Capacity [Sec 197(4)]
Remuneration for services rendered by Director in a capacity
other than as Director will not fall under the limits prescribed,
provided, in the opinion of the Nomination and remuneration
committee and Board of Director, the Director posses the
qualification for the practice of that other Profession.
34
WHAT COMES UNDER
PROFESSION
Following person are considered to be professionals as per the various
cases decided (Source Ramaiya)
 a journalist.
 an editor of a magazine but does not include publisher/proprietor.
 an author.
 an engineer.
 a man of letters writing numerous articles.
 a film actor.
 an optician.
 a commission agent.
 an auctioneer, valuer or an estate agent.
In addition to above an architect, solicitor, stock broker, CA & advocate
will also come under professionals.
Remuneration For Services Rendered In
Professional Capacity [Sec 197(4)]
 Now the requirement of CG approval is
not required.
 However, the remuneration for other
services are subject to the compliance of
Sec 188.
 Necessary Disclosure in Board Report is
must.
35
Remuneration For Services Rendered In
Professional Capacity [Sec 197(4)]
As per Sec. 177(4)(iv), approval of the
Audit Committee is must even though
it is at arm’s length and in the ordinary
course of business.
Entry in the register of contracts under
Sec. 189 will be required to be entered,
unless the value of transaction is less
than Rs. 5 Lakhs.
36
Restrictions on Remuneration to
Professional Directors of Listed Companies
In case of No Profits or Inadequate Profits,
even Listed Company can now pay only up to
5% of its Net Profits (2.5% + 2.5%), to its
professional Managerial Personnel.
Earlier MCA has given exemption for LC
effective from 14th July 2011, which is now
withdrawn.
Therefore, now approval of CG required is
must, if the remuneration is excess of the
aforesaid Limits even for Professional
37
Directors.
+ Points for Discussion
1
• When a Managerial Personnel is
otherwise entitle for 5% of Net-profits,
how this provision will really benefit or
can it put more stringent conditions for
professional Directors???
2
• Inadequate Profits means????.
38
Remuneration to Independent
Directors
ELIGIBLE:
 He is entitled for Sitting Fee.
 He is entitled for Commission (only
Annual).
INELIGIBLE:
 He is not entitled for any ESOP - Sec
149(9) & 197(7).
 Any other monetary gain
39
+ Points for Discussion
1
• Since SEBI (Share Based Employee Benefits)
Regulation Guidelines, 2014, prohibits ESOP to
ID w.e.f 01/10/2014, whereas the Companies Act
has come into force 1st April 2014, In such
circumstances, Can a Listed Company grant ESOP
to ID, during 1st April 2014 to 30th September
2014??
2
• What is status of ESOP Granted before 31st March
2014 to ID, but vested and/or exercised after 1st
April 2014??
40
41
Who are the Director
eligible for ESOP??
Director who is not a Independent Director [Sec.197(7)]
Director who does not belong to Promoter or Promoter
Group or his Family.
Director who does not hold either directly or indirectly
more than 10% of outstanding Equity Shares of the
company.
Points for Discussion:
While calculating 10% holding of Directors, should we
include relatives holding or not??
42
DISCLOSURE
REQUIREMENT
[Sec.197(12)]
Applicable to Listed Companies.
Now Disclosure of Remuneration in the Board’s Report is
must.
Insurance Premium [Sec197(13)]
Insurance Premium amount is not part of the
Remuneration. However, if such person found guilty,
then shall be treated as part of their remuneration.
Note :NO such provision was there in CA, 1956
Penal Provision [Sec. 197(15)]
If Company not complied with
the provisions of Sec.197, fine
shall be:
Min – 1.00 Lakh
Max – 5.00 Lakhs
CA, 1956 is silent about the penal
provisions
43
REMUNERATION FROM HOLDING AND
SUBSIDIARY COMPANY [SEC. 197(14)]
 Any director who is in receipt of any commission
from company and who is MD or WTD shall not
be disqualified from receiving any remuneration
or commission from holding company or
subsidiary company.
 This information shall be disclosed by company
in the Board’s Report.
 This Section does not cover Manager.
Note : Under sec. 309(6) of CA,1956 MD/ WTD
were not entitled to receive such
remuneration and commission.
44
Commission to Non Executive Director
 Company may pay such amount within the ceiling
of 1% or 3% as to case may be
 Approval of members will be required if
commission exceed Ceiling limit.
 Under Sec. 309(4) of CA, 1956 person who is not
a WTD or MD can not be paid any remuneration
otherwise than by way of commission, without
approval of CG if passed by special resolution &
its within the ceiling limit prescribed.
 Does it mean, can we pay more than 1 % or 3 %,
as the case may be, of Net Profits as commission,
under CA 2013???
45
REFUND OF EXCESS REMUNERATION
PAID

If any such director draws or receives,
directly or indirectly, by way of fee /
remuneration any such sums in excess of
the limit as prescribed or without the
prior sanction, such remuneration shall
be refunded to the Company and until
such sum is refunded, hold it in trust for
the Company.

The Company shall not waive
recovery of any sum refundable to it.
the
46
47
SCHEDULE V
48
APPOINTMENT WITHOUT APPROVAL OF CG
(a)
had not been sentenced to imprisonment for any period, or
to a fine exceeding one thousand rupees, for the conviction
of an offence under any of the 16 Acts.
New in the list - the Prevention of Money-Laundering Act, 2002
(b) had not been detained for any period under the
Conservation of Foreign Exchange and Prevention of
Smuggling Activities Act, 1974
(c) completed the age of 21 years and has not attained the age
of 70 years
49
APPOINTMENT WITHOUT APPROVAL OF CG
(d) where he is a managerial person in more than one company,
he draws remuneration from one or more companies subject
to the ceiling provided in section V of Part II;
(e ) he is resident of India.
staying in India for a continuous period of not less than 12 months
immediately preceding the date of his appointment as a MR and
who has come to stay in India,—
( i) for taking up employment in India; or
( ii) for carrying on a business or vacation in India.
Not applicable to companies in SEZ, provided that a person, being
a non-resident in India shall enter India only after obtaining a
proper Employment Visa
50
REMUNERATION
Section I
by companies having profits
Subject to the provisions of section 197, a company having profits
in a financial year may pay remuneration to a managerial person
or persons not exceeding the limits specified in such section.
51
REMUNERATION
Section II
by companies having no or inadequate profit without CG approval
Where in any financial year during the currency of tenure of a
managerial person, a company has no profits or its profits are
inadequate, it may, without CG Approval, pay remuneration to the
managerial person not exceeding the higher of the limits
under (A) and (B) given below:—
52
REMUNERATION
Section II
by companies having no or inadequate profit without CG approval
(A)
Where the effective capital is
Limit of yearly remuneration
payable shall not exceed
(i ) Negative or < 5 crores
30 lakhs
(ii ) 5 cr and above but < 100 Cr
42 lakhs
(iii ) 100 cr and above < 250 Cr
60 lakhs
(iv ) 250 crores and >
60 lakhs plus 0.01% of
the effective capital in
excess of Rs. 250 crores:
Provided that the above limits shall be doubled if the resolution
passed by the shareholders is a special resolution.
If period is less than one year, the limits shall be pro-rated.
53
REMUNERATION
Section II
by companies having no or inadequate profit without CG approval
(B ) In the case of a managerial person who was not a security
holder holding securities of the company of nominal value of Rs. 5
lakh or more or an employee or a director of the company or not
related to any director or promoter at any time during the two
years prior to his appointment as a managerial person, — 2.5% of
the current relevant profit:
Provided that if the resolution passed by the shareholders is a
special resolution, this limit shall be doubled.
54
REMUNERATION
Section II
by companies having no or inadequate profit without CG approval
Provided further that the limits specified under this section shall
apply, if—
(i ) Approved by Board and by the Nomination and Remuneration
Committee if company covered
(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 30 days in the
preceding FY
(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;
55
REMUNERATION
Section II
by companies having no or inadequate profit without CG approval
(iv ) a statement along with a notice calling the GM 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) Foreign investments or collaborations, if any.
56
REMUNERATION
Section II
by companies having no or inadequate profit without CG approval
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 with respect to the
country of his origin)
(7) Pecuniary relationship directly or indirectly with the company,
or relationship with the managerial personnel, if any.
57
REMUNERATION
Section II
by companies having no or inadequate profit without CG approval
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.
58
REMUNERATION
Section II
by companies having no or inadequate profit without CG approval
IV. Disclosures:
The following disclosures shall be mentioned in the Board of
Director’s report under the heading “Corporate Governance”, if
any, attached to the financial statement:—
(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.
59
REMUNERATION
Section III
Remuneration payable by companies having no profit or
inadequate profit without Central Government approval in certain
special circumstances
In the following circumstances a company may, without the CG
approval, pay remuneration to a managerial person in excess of
the amounts provided in Section II above:—
(a) where the remuneration in excess of the limits specified in
Section I or II is paid by any other company and that other
company is either a foreign company or has got the approval of its
shareholders in general meeting to make such payment, and
treats this amount as managerial remuneration for the purpose of
section 197 and the total managerial remuneration payable by such
other company to its managerial persons including such amount or
amounts is within permissible limits under section 197.
60
REMUNERATION
Section III
Remuneration payable by companies having no profit or
inadequate profit without Central Government approval in certain
special circumstances
(b) where the company—
(i) is a newly incorporated company, for a period of seven years
from the date of its incorporation, or
(ii) is a sick company, for whom a scheme of revival or
rehabilitation has been ordered by the Board for Industrial
and Financial Reconstruction or National Company Law
Tribunal, for a period of five years from the date of sanction
of scheme of revival,
it may pay remuneration up to two times the amount permissible
under Section II.
61
REMUNERATION
Section III
Remuneration payable by companies having no profit or
inadequate profit without Central Government approval in certain
special circumstances
(b) where the company—
(i) is a newly incorporated company, for a period of seven years
from the date of its incorporation, or
(ii) is a sick company, for whom a scheme of revival or
rehabilitation has been ordered by the Board for Industrial
and Financial Reconstruction or National Company Law
Tribunal, for a period of five years from the date of sanction
of scheme of revival,
it may pay remuneration up to two times the amount permissible
under Section II.
62
REMUNERATION
(c ) where remuneration of a managerial person exceeds the limits
in Section II but the remuneration has been fixed by the BIFR
or NCLT
Provided that the limits under this Section shall be applicable
subject to meeting all the conditions specified under Section II and
the following additional conditions:—
(i ) except as provided in para (a ) of this Section, the managerial
person is not receiving remuneration from any other company;
(ii ) the auditor or CS of the company or where the company has
not appointed a Secretary, a PCS, certifies that all secured creditors
and term lenders have stated in writing that they have no objection
for the appointment of the managerial person as well as the
quantum of remuneration and such certificate is filed along with
the return as prescribed under section 196 (4).
(iii) the auditor or CS or where the company has not appointed a
secretary, a PCS that there is no default on payments to any
creditors, and all dues to deposit holders are being settled on
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REMUNERATION
(d ) a company in a Special Economic Zone as notified by
Department of Commerce from time to time which has not raised
any money by public issue of shares or debentures in India, and
has not made any default in India in repayment of any of its
debts (including public deposits) or debentures or interest
payable thereon for a continuous period of thirty days in any
financial year, may pay remuneration up to Rs. 2.4 Cr per annum.
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REMUNERATION
SECTION IV
Perquisites not included in managerial remuneration:
1. A managerial person shall be eligible for the following
perquisites which shall not be included in the computation of the
ceiling on remuneration specified in Section II and III:—
(a) contribution to provident fund, superannuation fund or annuity
fund to the extent these either singly or put together are not
taxable under the Income-tax Act, 1961
(b) gratuity payable at a rate not exceeding half a month’s salary
for each completed year of service; and
(c) encashment of leave at the end of the tenure.
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REMUNERATION
SECTION IV
Perquisites not included in managerial remuneration:
1. A managerial person shall be eligible for the following
perquisites which shall not be included in the computation of the
ceiling on remuneration specified in Section II and III:—
(a) contribution to provident fund, superannuation fund or annuity
fund to the extent these either singly or put together are not
taxable under the Income-tax Act, 1961
(b) gratuity payable at a rate not exceeding half a month’s salary
for each completed year of service; and
(c) encashment of leave at the end of the tenure.
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REMUNERATION - SECTION IV
Perquisites not included in managerial remuneration:
2. In addition to the perquisites specified in paragraph 1 of this section,
an expatriate managerial person (including a non-resident Indian) shall
be eligible to the following perquisites which shall not be included in
the computation of the ceiling on remuneration
specified in Section II or Section III—
(a ) Children’s education allowance: In case of children studying in or
outside India, an allowance limited to a maximum of Rs. 12,000 per
month per child or actual expenses incurred, whichever is less. (two
children).
(b) Return holiday passage once in a year by economy class or once in
two years by first class to children and to the members of the family
from the place of their study or stay abroad to India if they are not
residing in India, with the managerial person.
(c ) LTC: Return passage for self and family in accordance with the rules
specified by the company where it is proposed that the leave be spent
in home country instead of anywhere in India.
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REMUNERATION - SECTION IV
“effective capital” means
the aggregate of the paid-up share capital (excluding share
application money or advances against shares); amount, if any, for
the time being standing to the credit of share premium account;
reserves and surplus (excluding revaluation reserve); long-term
loans and deposits repayable after one year (excluding working
capital loans, over drafts, interest due on loans unless funded, bank
guarantee, etc., and other short-term arrangements) as reduced by
the aggregate of any investments (except in case of investment by
an investment company whose principal business is acquisition of
shares, stock, debentures or other securities), accumulated losses
and preliminary expenses not written off.
‘‘family’’ means the spouse, dependent children and dependent
parents of the managerial person.
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REMUNERATION - SECTION IV
“effective capital” means
the aggregate of the paid-up share capital (excluding share
application money or advances against shares); amount, if any, for
the time being standing to the credit of share premium account;
reserves and surplus (excluding revaluation reserve); long-term
loans and deposits repayable after one year (excluding working
capital loans, over drafts, interest due on loans unless funded, bank
guarantee, etc., and other short-term arrangements) as reduced by
the aggregate of any investments (except in case of investment by
an investment company whose principal business is acquisition of
shares, stock, debentures or other securities), accumulated losses
and preliminary expenses not written off.
‘‘family’’ means the spouse, dependent children and dependent
parents of the managerial person.
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REMUNERATION – SECTION V
Remuneration payable to a managerial person in two companies:
Subject to the provisions of sections I to IV, a managerial person
shall draw remuneration from one or both companies, provided
that the total remuneration drawn from the companies does not
exceed the higher maximum limit admissible from any one of the
companies of which he is a managerial person.
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REMUNERATION – PART III
Provisions applicable to Parts I and II of this Schedule
1.
Appointment and remuneration referred to in Part I and Part II
of this Schedule shall be subject to approval by a resolution of
the shareholders in general meeting.
2. The auditor or the Secretary of the company or where the
company is not required to appointed a Secretary, a Secretary
in whole-time practice shall certify that the requirement of this
Schedule have been complied with and such certificate shall
be incorporated in the return filed with the Registrar under
sub-section (4) of section 196.
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REMUNERATION – PART III
Provisions applicable to Parts I and II of this Schedule
1.
Appointment and remuneration referred to in Part I and Part II
of this Schedule shall be subject to approval by a resolution of
the shareholders in general meeting.
2. The auditor or the Secretary of the company or where the
company is not required to appointed a Secretary, a Secretary
in whole-time practice shall certify that the requirement of this
Schedule have been complied with and such certificate shall
be incorporated in the return filed with the Registrar under
sub-section (4) of section 196.
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REMUNERATION – PART IV
The Central Government may, by notification, exempt any class or
classes of companies from any of the requirements contained in
this Schedule.
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QUESTIONS?
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