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:
|
S.No
|
Where Effective
Capital is
|
Limit of
yearly remuneration payable shall not exceed (Rupees)
|
|
1
|
Negative or
less than 5 crores
|
60 lacs
|
|
2
|
5 crores or
above but less than 100 crores
|
84 lac
|
|
3
|
100 crores
and above but less than 250 crores
|
120 lacs
|
|
4
|
250 crores
and above
|
120 lacs plus
.01% of the effective capital in excess of Rs.250 crores
|
ΓΌ 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.
