The Ministry of Corporate Affairs (MCA) on June 30, 2016 has notified The Companies (Appointment and Remuneration of Managerial Personnel) Amendment Rules, 2016 by amending the principle rule the Companies (Appointment and Remuneration of Managerial Personnel) Amendment Rules, 2014, the new amended rules are yet not published in the Official Gazette of India.
Amendments:
According to Rule 3 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, every Company is required to file a return of appointment of Managing Director, Whole Time Director or Manager, Chief Executive Officer (CEO), Company Secretary and Chief Financial Officer (CFO) within 60 days from the date of appointment with the ROC in Form MR-1.
Now, as per the new amendment rules, the requirement for filing return of appointment with respect to Company Secretary, Chief Executive Officer (CEO) and Chief Financial Officer Officer (CFO) has been omitted from Rule 3. Requirement of filing Form MR-1 for return of appointment is applicable only to Managing Director, Whole Time Director or Manager. Subsequently Form MR-1 shall be substituted with the amendment.
Disclosure in Board's Report (Rule 5)
Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 specifies some disclosures that every listed Company shall disclose in their Board's Report. The amended rules has omitted some of the disclosures such as:
1. Clause 'v' of sub rule '1' of rule '5' : the explanation on the relationship between average increase in remuneration and company performance.
2. Clause 'vi' of sub rule '1' of rule '5' : comparison of the remuneration of the Key Managerial Personnel against the performance of the company.
3. Clause 'vii' of sub rule '1' of rule '5' : variations in the market capitalisation of the company, price earnings ratio as at the closing date of the current financial year and previous financial year and percentage increase over decrease in the market quotations of the shares of the company in comparison to the rate at which the company came out with the last public offer in case of listed companies, and in case of unlisted companies, the variations in the net worth of the company as at the close of the current financial year and previous financial year.
4. Clause 'ix' of sub rule '1' of rule '5' : comparison of the each remuneration of the Key Managerial Personnel against the performance of the company.
5. Clause 'x' of sub rule '1' of rule '5' : the key parameters for any variable component of remuneration availed by the directors.
6. Clause 'x' of sub rule '1' of rule '5' : the ratio of the remuneration of the highest paid director to that of the employees who are not directors but receive remuneration in excess of the highest paid director during the year.
7. The wordings of sub rule '2' of rule '5' shall be substituted as: The board’s report shall include a statement showing the name of top ten employees in terms of remuneration drawn and the name of every employee ,who:
8. The wordings of clause 'i' of sub rule '2' of rule '5' shall be substituted as: if employed throughout the financial year, was in receipt of remuneration for that year which, in the aggregate, was not less than one crore and two lakh rupees.
9. The wordings of clause 'ii' of sub rule '2' of rule '5' shall be substituted as: if employed for a part of the financial year, was in receipt of remuneration for any part of that year, at a rate which, in the aggregate, was not less than eight lakh and fifty thousand rupees per month;
Information Source: www.mca.gov.in
Click here to download the Complete Rule.
“Disclaimer: Statements expressed in this article are those of the author’s personal views and interpretation of law. However, every care has been taken in the compilation of this information and every attempt made to present up-to-date and accurate information.”
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