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Jayesh N. Tribhuvan (Querist)

18 August 2009 Thanks Amit for reply.

But then what is the maximum limit stated in provision of section 198 and 309 for managerial remuneration i.e 11% of net profit and if remuneration exceeds above limit company needs to take approval from Central Government.

awaiting for reply

Ankur Garg

Ankur Garg (Expert)

18 August 2009 Hi,

Total ceiling of managerial remuneration

Section 198(1) relates to overall maximum managerial remuneration and managerial remuneration in case of absence or inadequacy of profits.

The total managerial remuneration payable by a public company or a private company which is a subsidiary of a public company, to its directors and its manager in respect of any financial year shall not exceed 11% of the net profits of the company for that financial year. Such net profits shall be computed in a manner laid down under sections 349 and 350, except that the remuneration of the directors shall not be deducted from the gross profits.

Remuneration is payable to all the directors including managing and whole-time directors and in any capacity. Therefore, it includes the remuneration for services rendered by him in any other capacity other than that of a director.

Ankur Garg

Ankur Garg (Expert)

18 August 2009 REMUNERATION PAYABLE TO MANAGERIAL PERSONNEL BY COMPANY HAVING PROFITS
As per provisions of Section I of Part II of Schedule XIII to the Companies Act, 1956, subject to the provisions of sections 198 and 309, a company may pay any remuneration, by way of salary, dearness allowance, perquisites, commission and other allowances, which shall not exceed 5% of its net profits for one such managerial person, and if there is more than one such managerial person, 10% for all of them together. Section 309(3) provides that managerial personnel may be paid remuneration either by way of a monthly payment or at specified percentage of the net profits of the company or partly by one way and partly by the other. In case if remuneration exceeds 5% or 10% as the case may be, it cannot be paid without the approval of the Central Government.

Regards

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