Director remuneration

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shobhna sikka (Querist)
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05 December 2014 Dear Experts
pls let me know the restrictions on director remuneration on closely held ltd company(not listed) as per new companies act

CS Mitesh Mehta

CS Mitesh Mehta (Expert)
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06 December 2014 Section 197 of the Companies Act, 2013 prescribed the maximum ceiling for payment of managerial remuneration by a public company to its managing director whole-time director and manager which shall not exceed 11% of the net profit of the company in that financial year computed in accordance with section 198 except that the remuneration of the directors shall not be deducted from the gross profits.
Further, the company in general meeting may, with the approval of the Central Government, authorise the payment of remuneration exceeding 11% of the net profits of the company, subject to the
provisions of Schedule V.
The net profits for the purposes of this section shall be computed in the manner referred to in section 198.

The remuneration payble to any one managing director or wholetime director or manager shall not exceed 5% of the net profits of the company and if there are more than one such director remuneration shall not exceed 10% of the net profits to all such directors and manager taken together.
Except with the approval of the company in general meeting, the remuneration payable to directors who are neither managing directors nor whole-time directors shall not exceed,—
— 1% of the net profits of the company, if there is a managing or
whole-time director or manager;
— 3% of the net profits in any other case.

The percentages aforesaid shall be exclusive of any fees payable to
directors for attending the meeting of the board/committees or for such other purposes as decided by the board.

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