AS PER COMPANY ACT director remunerarion

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Avijit Das (Querist)
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16 August 2021 ANY PROVISION FOR DIRECTOR REMUNERATION MORE THAN 11% OF NET PROFIT FOR PUBLIC LIMITED COMPANY. COMPANY LAST YEAR PROFIT 76 LACS, PAID UP CAPITAL 80 LACS

Aashok Kumar Sharma

Aashok Kumar Sharma

(Expert)
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06 July 2024 In India, the Companies Act, 2013, governs the remuneration of directors of a public limited company. According to Section 197 of the Act, the total managerial remuneration payable by a public company to its directors, including managing director and whole-time director, and its manager in respect of any financial year shall not exceed eleven percent of the net profits of that company for that financial year except with the approval of the shareholders.

Here are some key points regarding director remuneration that exceeds 11% of net profits:

Steps to Approve Director Remuneration Exceeding 11% of Net Profits:

1. Board Resolution:
• The board of directors must first pass a resolution recommending the payment of remuneration exceeding 11% of the net profits.
2. Approval of Shareholders:
• The company must obtain the approval of the shareholders by passing a special resolution in a general meeting.
3. Central Government Approval:
• If the remuneration exceeds the limits specified in Section 197, in addition to shareholder approval, the company must also seek approval from the Central Government.
4. Disclosure in Financial Statements:
• Full details of the remuneration must be disclosed in the financial statements, including the justification for the proposed remuneration.

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