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RANJAN & ASSOCIATES, CHARTERED ACCOUNTANTS

MANAGERIAL REMUNERATION
APPLICABLE SECTIONS: 198,268,269,309,310,311 AND SCHEDULE XIII
OF THE COMPANIES ACT, 1956

 The remuneration payable to the directors of a company, including any managing or
whole-time director, shall be determined, in accordance the provisions given below
either by the articles of the company, or by a resolution (special resolution if the articles
so require), passed by the company in general meeting and the remuneration payable to
any such director determined as per the said provisions shall be inclusive of the
remuneration payable to such director for services rendered by him in any other
capacity.

However, any remuneration for services will not be so included if the services are of a
professional nature and in the opinion of the Central Government, the director
possesses the requisite qualifications.

 A director may receive remuneration by way of fees for attending each meeting of the
Board or of any committee thereof (Sitting Fees).

 A director who is in whole time employment of the company or a 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 and partly by the other.

 Such remuneration cannot exceed 5 % of the net profits of the company, except with
the approval of the Central Government in case of one director and 10 % for all
such directors.

 The total managerial remuneration payable by a public company or a private company
which is a subsidiary of a public company to its directors and its manager in any
financial year must not exceed 11 % of the net profits of the company calculated in
accordance with the provisions of sections 349 and 350.

 In the case of a director who is neither in the whole-time employment of the company
nor a managing director may be paid remuneration either by way of a monthly,
quarterly or annual payment with the approval of the Central Government or by way of
commission if the company by special resolution authorises such payment. Such special
resolution to in sub-section (4) shall not remain in force for a period of more than five
years; but may be renewed, from time to time, by special resolution for further periods

of not more than five years at a time. if the company has a managing or whole-time director or a manager.  No approval of the Central Government is required in case the remuneration is within the limits mentioned in Schedule XIII to the Companies Act. Remuneration payable to such directors cannot exceed: - a.  The above provisions pertaining to remuneration do not apply to a private company unless it is a subsidiary of a public company. Only One Managing Director or Whole Not exceeding 5% of the net profits computed in Time Director the manner as stated above.  If any director earns remuneration from a company in excess of the above limits without prior approval of the Central Government. b.  No director of a company who is in receipt of any commission from the company and who is either in the whole-time employment of the company or a managing director shall be entitled to receive any commission or other remuneration from any subsidiary of such company. 1956. but no Not exceeding 3% of the net profits computed in Managing Director or Whole Time the manner as stated above. Director . one per cent. More than One Managing Director or Not exceeding 10% of the net profits computed in Whole Time Director the manner as stated above.  The Company cannot waive recovery of such sum due from the director unless approved by the Central Government. One or more Director(s). in any other case. he shall refund the excess to the company and until such repayment. three percent of the net profits of the company. hold the money in trust with him for the company. of the net profits of the company. LIMITS OF MANAGERIAL REMUNERATION IN A SUMMARISED FORM: Total Managerial Remuneration 11% of the net profits of the company calculated Payable in accordance with the provisions of sections 349 and 350.

2. 50 Crores Rs. 2.000 Rupees 25 Crores or more but less than Rs.) A Managerial Person can be paid remuneration by way of salary. then Section I is applicable.00.) If there are no profits or inadequate profits. 1 Crore Rs.000 .75.) The profits are considered to be inadequate for this purpose if the company has profits but the remuneration desired to be paid to the Managerial Personnel exceeds the limits as specified by the other relevant Sections of the Companies Act.50. 1956. then Section II is applicable. 100 Crores Rs. Director IMPORTANT POINTS IN SCHEDULE XIII REMUNERATION OF MANAGERIAL PERSONNEL HAS TO BE PAID AS PER PART II OF SCHEDULE XIII. 3.000 per annum or Rs.) If the Company has adequate profits. 24. 1.000 Rupees 1 Crore or more but less than Rs.000 per month on the following scale: If the effective capital** of the Company is: Monthly Remuneration not exceeding: Less than Rs.) The remuneration can be paid as per Section II of this Schedule in case of no profits or inadequate profits as under: A. perquisites and any other allowances not exceeding the ceiling limit of Rs.00. 1. 1.000 Rupees 5 Crores or more but less than Rs.000 Rupees 50 Crores or more but less than Rs.25.00.One or more Director(s) and also a Not exceeding 1% of the net profits computed in Managing Director or Whole Time the manner as stated above. 5 Crores Rs. 1. 25 Crores Rs.00. 2. 75. 4.000 Rupees 100 Crores or more Rs. dearness allowance. Notes: 1.

) 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. ii. iv.50.) Payment of Remuneration is approved by a resolution passed by the Remuneration Committee. 3.000 per month on the following scale: If the effective capital** of the Company is: Monthly Remuneration not exceeding: Less than Rs.00.00. 50 Crores Rs.) A special resolution has been passed at the general meeting of the company for payment of remuneration for a period not exceeding three years. perquisites and any other allowances not exceeding the ceiling limit of Rs. the following conditions have to be satisfied: i. the following conditions have to be satisfied: i. 4. 1 Crore Rs.000 but at the same time.but at the same time.) 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. a statement is given to the shareholders containing the information as is mentioned in Para B of Section II of Part II of this Schedule. 2. 4.000 Rupees 50 Crores or more but less than Rs.50. dearness allowance. 5 Crores Rs. 1. iii.00.) Along with the notice as is referred to above.000 Rupees 100 Crores or more Rs.000 Rupees 1 Crore or more but less than Rs.) Payment of Remuneration is approved by a resolution passed by the Remuneration Committee.000 Rupees 25 Crores or more but less than Rs. B.000 per annum or Rs.00.000 Rupees 5 Crores or more but less than Rs. ii. 48. 3.50.00.) A Managerial Person can be paid remuneration by way of salary. Such statement shall give the following information: . 2. 25 Crores Rs. 100 Crores Rs.

00.) A Managerial Person can be paid remuneration by way of salary. dearness allowance.50. iv.000 Rupees 50 Crores or more but less than Rs. 50 Crores Rs. perquisites and any other allowances exceeding the ceiling limit of Rs. 25 Crores Rs. 100 Crores Rs. 1 Crore Rs.000 Rupees 25 Crores or more but less than Rs. a statement is given to the shareholders containing the information as is mentioned in Para C of Section II of Part II of this Schedule.) A special resolution has been passed at the general meeting of the company for payment of remuneration for a period not exceeding three years.) 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. 48. 2.00.000 Rupees 5 Crores or more but less than Rs. ii. the following conditions have to be satisfied: i. 4. 1. 4. 3.00.00. Such statement shall give the following information: .1.000 per month on the following scale: If the effective capital** of the Company is: Monthly Remuneration payable exceeds: Less than Rs. 2. OTHER INFORMATION 4.000 Rupees 1 Crore or more but less than Rs.00.50.) Along with the notice as is referred to above.000 per annum or Rs. GENERAL INFORMATION 2. iii.000 but at the same time.000 Rupees 100 Crores or more Rs.50. 3.) Payment of Remuneration is approved by a resolution passed by the Remuneration Committee. INFORMATION ABOUT THE APPOINTEE 3. DISCLOSURES C. 5 Crores Rs.

) These companies have 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. whichever is less whether children are studying in India or abroad. 5. OTHER INFORMATION 4. 1961. the following conditions have to be satisfied: i. but at the same time. ii. . 2.) Encashment of leave at the end of the tenure. GENERAL INFORMATION 2. INFORMATION ABOUT THE APPOINTEE 3. 4. ii.40. 20.) These companies have not raised any money by public issue of shares or debentures in India.) Gratuity payable at a rate not exceeding half a month’s salary for each completed year of service. or Annuity Fund to the extent they whether singly or taken together are not taxable under the Income Tax Act.) Holiday passage for children studying abroad or family residing abroad: Return holiday passage once in a year by economy class or once in 2 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. 3. 2.00.) Contribution to Provident Fund. be eligible for the following perquisites which shall not be included in the computation of the ceiling on remuneration specified in the above paragraphs: i.) An Expatriate Managerial Person including an NRI shall in addition to the above perquisites.) A Managerial Person can be paid remuneration by way of salary.) This Paragraph shall apply in the case the effective capital of the company is negative. FOLLOWING PERQUISITES SHALL NOT BE INCLUDED IN THE COMPUTATION OF THE CEILING ON REMUNERATION SPECIFIED IN THE ABOVE PARAGRAPHS: 1. ii. D.) Children’s Education Allowance: For maximum 2 children not exceeding Rs.000 per month per child or actual expenses incurred. perquisites and any other allowances not exceeding the ceiling limit of Rs.)The prior approval of the Central Government is obtained for payment of remuneration as per this Paragraph.00. Superannuation Fund.1.000 per month in case of companies in Special Economic Zones as notified by the Department of Commerce from time to time.000 per annum or Rs. DISCLOSURES ADDITIONAL CONDITIONS TO BE FULFILLED FOR THIS PARAGRAPH: i. dearness allowance.

and other short-term arrangements. etc.iii.} EFFECTIVE CAPITAL = .) Leave Travel Concession: 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. bank guarantee. overdrafts.) } MINUS { Investments (except investments by an Investment Company) + Accumulated Losses + Preliminary Expenses not written off. ** EFFECTIVE CAPITAL: { Paid-up share capital (excluding share application money or advances against shares) + Amount 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. interest due on loans unless funded.

Note:- Negative Effective Capital: The effective capital calculated in accordance with the above provisions and is less than zero.e.D.D.T. are subject to approval by resolution of shareholders in general meeting. IMPORTANT PROVISION APPLICABLE TO ALL PARTS OF SCHEULE XIII:  Both Appointment and Remuneration of the directors i. and/or W. Form 25C. M.e.  The auditor or secretary or secretary in whole-time practice will certify that all requirements have been complied with which shall be incorporated in the Return filed under Section 269(2) i. .