Sandeep Ahuja & Co.

Established in the year 1986, we are a leading chartered accountancy firm based in Delhi & NCR rendering comprehensive professional services which include statutory audit, internal audit, direct tax, transfer pricing, GST, bank audit, propriety audit, cost accounting, internal financial controls and risk advisory.

Wednesday, September 14, 2016

MCA amends schedule V of Companies Act 2013 with respect to Managerial Remuneraion

MCA on 12 September, 2016 makes the following amendments to Schedule V of the said Act, with respect to Managerial Remuneration to be effective from the date of its publication in the official gazette:
i)                    Remuneration to managerial person payable by companies having no profit or inadequate profit without Central Government approval cannot exceed the limits under (A) and (B) given below:
 (A) Limits of yearly remuneration depending on effective capital i.e Capital plus reserves:
Where Effective Capital is
Limit of yearly remuneration payable shall not exceed (Rupees)
Negative or less than 5 crores
60 lacs
5 crores or above but less than 100 crores
84 lac
100 crores and above but less than 250 crores
120 lacs
250 crores and above
120 lacs plus .01% of the effective capital in excess of Rs.250 crores

ü        The above limits shall be doubled if the resolution passed by the shareholders is a special resolution.That for a period less than one year, the limits shall be pro-rated.

(B) No approval is required if all the conditions are fulfilled:

- A managerial person is functioning in a professional capacity

- Such managerial person is not having any interest in the capital of the company or its holding     company or any of its subsidiaries directly or indirectly or through any other statutory structures

- Such person is not having any, direct or indirect interest or related to the directors or promoters of the company or its holding company or any of its subsidiaries at any time during the last two years before or on or after the date of appointment

- Such person possesses graduate level qualification with expertise and specialized knowledge in the field in which the company operates.

Provided that any employee of a company holding shares of the company not exceeding 05% of its paid up share capital shall be deemed to be a person not having any interest in the capital of the company;

Provided further that the limits specified under items (A) ant (B) of this section shall apply, if‑
(i)                  payment of remuneration is approved by a resolution passed by the Board and  the company has not committed any default in repayment of any of its debts 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)                The company obtains prior approval in case of any defaults from secured creditors for the proposed remuneration and the fact of such prior approval having been obtained is mentioned in the explanatory statement to the notice convening the general meeting;
(iii)                an ordinary resolution or a special resolution, as the case may be, has been passed for payment of Remuneration as per the limits laid down in item (A) or a special resolution has been passed for payment of remuneration as per item (13), at the general meeting of the company for a period not exceeding three years.
(iv)               a statement along with a notice calling the general meeting referred to in clause (iii) is given to the shareholders establishing the reason for such payment by disclosing the information with regard to -

I. General information: Nature of industry, Date or expected date of commencement of commercial production, expected date of commencement of activities as per project approved by financial institutions appearing in the prospectus, financial performance based on given indicators & foreign investments or collaborations, if any.

II. Information about the appointee: Background details, Past remuneration, Recognition or awards, Job profile and his suitability & Remuneration proposed. The Comparative remuneration profile with respect to industry, size of the company, profile of the position and person and Pecuniary relationship directly or indirectly with the company or relationship with the managerial personnel, if any are to be disclosed.

III. Other information: Reasons of loss or inadequate profits, Steps taken or proposed to be taken for improvement, Expected increase in productivity and profits in measurable terms

IV. Disclosures : The disclosures shall be mentioned in the Board of Director’s report under the heading “Corporate Governance”
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; and

(iv) stock option details, if any, and whether the same has been issued at a discount.


  1. notification says the remuneration cannot exceed the limits under (A) and (B) which means both the Limit A and B should be fulfilled (or A or B)?
    Suppose if CFO is coming under Categ B whether Still he required to Comply Categ A limits as the notification say A and B?

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