Ministry of Corporate Affairs has issued a clarificatory circular today (April 10, 2015) on Managerial remuneration:
Giving a brief background & impact as per my understanding. Friends may kindly correct if required:
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Background
Giving a brief background & impact as per my understanding. Friends may kindly correct if required:
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Background
As per MCA Circular dated 16th August 2012, Listed Companies were exempt from obtaining Central Govt approval for payment of remuneration exceeding the limits given in Sch XIII of Companies Act 1956. This exemption was applicable only for Director/ Employee of a Company holding shares of less than 0.5 % of the paid up share capital under any ESOP scheme or qualification shares.
Stakeholders have raised query to MCA whether such Directors who were appointed earlier & were paid excess remuneration than Schedule XIII – whether they can continue to draw that salary even after 1.4.2014 (Effective date of Companies Act 2013), even though it is in excess of limits given under Schedule V of Companies Act 2013.
Clarification by MCA
MCA has now clarified vide today’s circular that Managerial personnel can continue to draw higher salary than what is provided under Schedule V of the Companies Act 2013 – till such term he was last appointed in the general meeting, even though a part of the period falls after 1st April, 2014.
Word of caution
It has to be noticed that similar exemption is not available in Companies Act 2013 and this exemption will hold good only till the period for which the Director was appointed earlier ; when they need to be re appointed, they have to comply with the provisions of the Act and Schedule V ceiling limits.
Issue involved
Stakeholders have raised query to MCA whether such Directors who were appointed earlier & were paid excess remuneration than Schedule XIII – whether they can continue to draw that salary even after 1.4.2014 (Effective date of Companies Act 2013), even though it is in excess of limits given under Schedule V of Companies Act 2013.
Clarification by MCA
MCA has now clarified vide today’s circular that Managerial personnel can continue to draw higher salary than what is provided under Schedule V of the Companies Act 2013 – till such term he was last appointed in the general meeting, even though a part of the period falls after 1st April, 2014.
Word of caution
It has to be noticed that similar exemption is not available in Companies Act 2013 and this exemption will hold good only till the period for which the Director was appointed earlier ; when they need to be re appointed, they have to comply with the provisions of the Act and Schedule V ceiling limits.
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To
All Regional Directors,
All Registrars of Companies,
All Stakeholders.
Subject : Remureration to Managerlal person under Schedule XIII of the Companies Act, 1956 - Clarification with regard to payment for the period
Sir,
Stakeholders have drawn attention to the Provisions of Schedule XIll (sixth proviso to Para (C) of Section ll of Part ll) of the Companies Act, 1956 (Earlier Act) and as clarified vide Circular number 14l11/2O12-CL-VII dated 16th August,2012, which allowed listed companies and their subsidiaries to pay remuneration, without approval of Central Government, in excess of limits specified in para II Para (C) of such Schedule if the managerial person met the conditions specified therein. Stakeholders have expressed that since similar provisions are not available in the Schedule V of the Companies Act, 2013, there is a need for a clarification that a managerial person appointed in accordance with such provision of Schedule XIII of Earlier Act may receive relevant remuneration for the period as approved by the company in accordance with such provisions of Earlier Act.
2. The matter has been examined in the light of earlier clarifications on transitional matters issued by the Ministry. It is clarified that a managerial person referred to in para 1 above may continue to receive remuneration for his remaining term in accordance with terms and conditions approved by company as per relevant provisions of Schedule XIII of earlier Act even if the part of his/her tenure falls after 1st April, 2014. 3. This issues with the approval of the competent authority.
Yours faithfully
(K.M.S. Narayanan)
Assistant Director (Policy) 23347263
Copy to:-
l. e-Governance Section and web contents Officer to place this circular on the Ministry website
2. Guard File.
TEXT OF THE CIRCULAR ISSUED BY MCA TODAY
General Circular No, O7/ 2O15
To
All Regional Directors,
All Registrars of Companies,
All Stakeholders.
Subject : Remureration to Managerlal person under Schedule XIII of the Companies Act, 1956 - Clarification with regard to payment for the period
Sir,
Stakeholders have drawn attention to the Provisions of Schedule XIll (sixth proviso to Para (C) of Section ll of Part ll) of the Companies Act, 1956 (Earlier Act) and as clarified vide Circular number 14l11/2O12-CL-VII dated 16th August,2012, which allowed listed companies and their subsidiaries to pay remuneration, without approval of Central Government, in excess of limits specified in para II Para (C) of such Schedule if the managerial person met the conditions specified therein. Stakeholders have expressed that since similar provisions are not available in the Schedule V of the Companies Act, 2013, there is a need for a clarification that a managerial person appointed in accordance with such provision of Schedule XIII of Earlier Act may receive relevant remuneration for the period as approved by the company in accordance with such provisions of Earlier Act.
2. The matter has been examined in the light of earlier clarifications on transitional matters issued by the Ministry. It is clarified that a managerial person referred to in para 1 above may continue to receive remuneration for his remaining term in accordance with terms and conditions approved by company as per relevant provisions of Schedule XIII of earlier Act even if the part of his/her tenure falls after 1st April, 2014. 3. This issues with the approval of the competent authority.
Yours faithfully
(K.M.S. Narayanan)
Assistant Director (Policy) 23347263
Copy to:-
l. e-Governance Section and web contents Officer to place this circular on the Ministry website
2. Guard File.
I feel this clarication should also be applicable to unlisted public companies where the appointment was made prior to 31.03.2014 till the rest of his tenure even if it falls after 31.03.2014.
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