Managerial Remuneration – FAQ
What is the revision with regard to age for appointment of Whole time Director?
What is the maximum amount of Sitting fees payable under Companies Act 2013?
Additional disclosure for Listed Companies.....
Position as regards Unlisted Companies
Steep penalty for non compliance
Read more....
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Managerial Remuneration – FAQ
Cs.
Rengarajan
Cs.
Palaniappan
What are the important provisions with regard to Managerial appointment
and remuneration?
- As per Section 196(1), no re-appointment of managing director, whole time director or manager shall be made earlier than one year before the expiry of his/her term.
- A person below the age of 21 and above the age of 70 cannot be appointed as Managing or whole time Director. However the maximum age can be relaxed by way of passing a shareholders resolution.
- Overall ceiling of Managerial remuneration continues to be 11 % of Net profits. If a company wants to pay in excess of this, shareholders and Central Government approval will be required.
- If a company has inadequate profits, it can pay remuneration to Directors without Central Government approval, if they comply with Schedule V Part II of Companies Act 2013. The applicable limit as given can be doubled if remuneration is approved by way of Special resolution.
What is the maximum amount of Sitting fees payable under Companies Act
2013?
Maximum sitting fees payable to
Director is Rs. 1,00,000/- as per the draft rules. There can different sitting
fees to independent and non-independent directors.
What is the time limit for filing the necessary return for appointment
of Managerial personnel?
Return relating to appointment
needs to be filed within 60 days instead of 90 days.
Is there any additional disclosure required for Listed Companies?
Yes. As per draft rules, listed
Companies need to disclose in the Board’s report following details related to
managerial remuneration.
i.
the ratio of the remuneration of each director to the median remuneration of
the employees of the company for the financial year ;
ii.
Percentage increase in remuneration of each director and CEO in the financial
year;
iii.
Percentage increase in the median remuneration of employees in the financial
year;
iv.
Number of permanent employees on the rolls of company;
v.
Explanation on the relationship between average increase in remuneration and
company performance;
vi.
Comparison of the remuneration of the Key Managerial Personnel against the
performance of the company;
vii.
The key parameters for any variable component of remuneration availed by the
directors;
viii.
The ratio of the remuneration of the highest paid director to that of the
employees who are not directors but receive remuneration in excess of the
highest paid director during the year.
ix. Affirmation that the
remuneration is as per the remuneration policy of the company
What is the position as regards Unlisted Companies?
Remuneration payable to the
managerial personnel for the company with no profits or inadequate profits
without Central Government approval has been substantially increased.
As per part IV schedule V, the
Central Government can exempt any company from complying with Schedule V. As
per the draft rules, the Companies other than listed companies and subsidiary
of a listed company may without Central Government approval pay remuneration to
its managerial person in the event of no profit or inadequate profit beyond
ceiling prescribed in section II, part II of Schedule V subject to complying
with the following conditions:-
(i) Payment of remuneration is
approved by a resolution passed by the Board and, in the case of a company
covered under sub-section (1) of section 178 also by the Nomination and
Remuneration Committee, if any and wild doing so record in writing clear reason and
justification for payment of remuneration beyond the said limit;
(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
thirty days in the preceding financial year before the date of appointment of
such managerial person;
(iii) Prior
approval of shareholders by way of a special resolution at a general meeting of
the company for payment of remuneration for a period not exceeding three years;
(iv)
A statement along-with a notice calling the general meeting referred to clause
(iii) of sub-rule (2) above, shall contain the information as per sub clause
(iv) of second proviso to clause (B) of section II of part-II of Schedule V of
the Act including reasons and justification for payment of remuneration beyond
the said limit.
What is the new provision on Compensation or loss of office ?
Provision for compensation for
loss of office has been newly inserted. Such compensation will be payable, only
if resignation is due to reconstruction of the Company or amalgamation with any
other body corporate and he/she is not appointed as the manager or managing
director or whole time director of the
reconstructed company or the body corporate resulting from amalgamation.
Any payment for loss office shall
not exceed remuneration which he would have earned if he had been office for
remainder of his term or for three years, which ever is shorter.
What is the penal clause for violation under the new Act?
Fine for contravention of
provision related to managerial remuneration has been increased. Fine shall not be less than Rs. 1,00,000/-
but which may extend to Rs.5,00,000/-.
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