Managerial remuneration

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

09 January 2013 As per the notification dated 8/02/2011 schedule XIII is not applicable to non listed public limited companies and central government approval for the same is not required.

In this scenario the limit specified in sec 309 for 5% and 10% is applicable or payment can exceed this limit and still no Central Government approval is required.

Querist : Anonymous

Querist : Anonymous (Querist)

12 January 2013 As per the notification dated 8/02/2011 schedule XIII is not applicable to non listed public limited companies and central government approval for the same is not required.

In this scenario the limit specified in sec 309 for 5% and 10% is applicable or payment can exceed this limit and still no Central Government approval is required.

Aashok Kumar Sharma online

Aashok Kumar Sharma online

(Expert)
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03 August 2024 The notification dated February 8, 2011, indeed made some significant changes regarding the applicability of Schedule XIII of the Companies Act, 1956, particularly concerning non-listed public companies. Here's a detailed breakdown of how this affects managerial remuneration and the need for Central Government approval:

### **Managerial Remuneration under Companies Act, 1956:**

1. **Schedule XIII and Its Applicability:**

- **Schedule XIII:** This schedule was part of the Companies Act, 1956, and it provided detailed provisions for the payment of managerial remuneration, including limits and conditions for both listed and non-listed public companies.
- **Notification of February 8, 2011:** The notification clarified that Schedule XIII was no longer applicable to non-listed public companies. This means that the specific requirements and limits prescribed in Schedule XIII for managerial remuneration no longer apply to such companies.

2. **Section 309 of the Companies Act, 1956:**

- **Section 309 Limits:** As per Section 309 of the Companies Act, 1956, the managerial remuneration for public companies was subject to certain limits:
- **5% of Net Profit:** For a single managing or whole-time director.
- **10% of Net Profit:** For all managerial personnel collectively.

- **Central Government Approval:** Before the notification, if the remuneration exceeded these limits, companies had to seek Central Government approval.

3. **Post-Notification Scenario:**

- **Limits and Approval:** After the notification, non-listed public companies no longer needed to follow Schedule XIII or seek Central Government approval for managerial remuneration. This means:
- **Flexibility:** Non-listed public companies can now set managerial remuneration without adhering to the specific limits of Schedule XIII.
- **Exceeding Limits:** They are free to set remuneration that exceeds the 5% and 10% limits specified in Section 309, without requiring Central Government approval.

4. **Ongoing Compliance:**

- **General Compliance:** While the specific requirements of Schedule XIII are not applicable, non-listed public companies still need to ensure compliance with the general provisions of the Companies Act, 1956, and any other applicable legal requirements.
- **Shareholder Approval:** Managerial remuneration should still be approved by the Board of Directors and may require approval from shareholders (usually through a resolution at the Annual General Meeting) depending on the company's Articles of Association and other relevant provisions.

### **Summary:**

- **Notification Impact:** The notification dated February 8, 2011, means Schedule XIII is not applicable to non-listed public companies, and they do not need Central Government approval for exceeding the remuneration limits specified under Section 309.
- **Managerial Remuneration Flexibility:** Non-listed public companies have the flexibility to set managerial remuneration beyond the previously prescribed limits without requiring Central Government approval.

**Recommendation:**

- **Consultation with Professionals:** For the most accurate and current guidance, consult with a legal or corporate governance professional. They can provide advice tailored to your specific situation and ensure compliance with all applicable laws and regulations, including any updates beyond the Companies Act, 1956.

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