What is the exact meaning of "inadequate profits" under Schedule V of Companies Act, 2013? Please could you clarify with an example.
Aarthi Bellie (Executive) (25 Points)
03 August 2015What is the exact meaning of "inadequate profits" under Schedule V of Companies Act, 2013? Please could you clarify with an example.
P C Agrawal
(Registered independent director Past Chairman of Aurangabad Chapter of ICSI Practicing Company Secretary at Aurangabad)
(8229 Points)
Replied 05 August 2015
Example:
Remuneration being paid to a director : Rs.10 lacs p.a.
Max. permissible remuneration to a single director : 5% of net profit
Hence company's net profit should be minimum : Rs.2 crores (10x100/5)
Actual net profit for the year is : Rs.50 lacs
Here we say that profit is inadequate to pay decided remuneration to the director.
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