Directors remunerations limit in pvt. company

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

29 September 2016 Dear Experts,
Can you pls let me know how much
maximum remuneration clause can be put in AOA by pvt. Ltd. Companies as
Per schedule V

Thanks,
Mukesh

Bharath

Bharath (Expert)
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29 September 2016 Pvt Ltd company, no cap on remuneration.

Querist : Anonymous

Querist : Anonymous (Querist)

29 September 2016 Sir,
Schedule V is partly applicable to pvt. Companies can you pls suggest in this case weather a pvt. Company can provide the remunerations as much as the directors want,

Bharath

Bharath (Expert)
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29 September 2016 Section 197 of CA, 2013 provides for overall maximum managerial remuneration and managerial remuneration in case of absence or inadequacy of profits. Sub-section (1) of said section states that “the total managerial remuneration payable by a public company….” makes it applicable only to public company. Clearly, this excludes private company from purview of overall managerial remuneration. However, further said section frustrates the flow when in sub-section (3) its provides that “Notwithstanding anything contained in sub-section (1) and (2), but subject to the provision of Schedule V, if, in any financial year, a company has no profits or its profits are inadequate, the company shall not pay to its directors……”. The absence of clear wording “a public company” in sub-section (3) in place of “a company” tantamount to make this section applicable to private company for paying managerial remuneration in case it has no profit or its profits are inadequate.

Hence it appears that, however the wording may be construed as ambiguous, sub-section (3) of section 197 of CA, 2013 does not apply to private companies in so far as payment of remuneration to managerial personnel is concerned in case it has no profit or its profits are inadequate.Accordingly, as a matter of interpretation, section 197 (3) of CA, 2013 is not applicable in the case of a private company at all.

Querist : Anonymous

Querist : Anonymous (Querist)

29 September 2016 Sir,
Yes sec 197 of companies act. Is not applicable to pvt. Companies. Hence can we put the clause of remuneration in AOA of pvt. Ltd. Company as much as the directors want. No limit at all

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