The Ministry of Corporate Affairs (MCA) has decided to do away with the concept of sitting fee in the Companies Bill. Once the Bill is passed there will be a quarterly cap on the remuneration of independent directors subject to a maximum amount and the whole time director's pay will be linked to net profits on an annual basis.

 

While the corporate honchos just like our MPs want the power to decide their salaries, the MCA feels that for listed entities it is prudent to have a cap on managerial remuneration.

However, sources say that this cap will be more than the existing provision for both- the whole time as well as the independent directors.

The new Companies Bill will do away with the concept of sitting fees which is paid to directors for attending board meetings.

Currently, sitting fees is a key component of an independent director’s pay and there is a ceiling of20,000 per meeting. The ministry is now going to notify a quarterly ceiling on the overall pay of the independent directors.

The MCA’s thought process is that it does not matter in what form the directors are compensated. It is only concerned with the total amount which is paid by the company to its directors.

For accountants the news is that the revised schedule 6 which deals with the new format of the balance sheet will come into effect from the April 1, 2012. So now they have sufficient time to prepare themselves.

Sources also add that MCA has written to the Finance Ministry saying that the new Companies Bill will be tabled in the parliament in the next session as it could not make it this time due to a truncated budget session.

In the meantime the MCA is revisiting the act clause by clause.

Source :https://www.moneycontrol.com/news/business/govt-to-do-awaysitting-fee-for-directors_532031.html