Mr. A is the MD in two unlisted public company. he draws a remuneration of Rs. 2400,000 per annum from each of the two company. The effective capital of both the companies fall in the slab of effective capital of Rs. 5 crore to 25 crore.
Mr. A does not want to go for Central Government approval.
Can he draw the aforesaid amount of remuneration ?
if not then what is the maximum remuneration that he can draw ?
is there any latest circular according to which the MD of public company can draw any amount of remuneration without Central Government approval ?
No, if you are paying from both company and your both company company maintain the maximum limit of paying the remuneration then you need not necessary to take CG approval.
For this, please read section III of Part II to Schedule XIII.
In the aforesaid scenario, the MD is drawing the remuneration in excess of the threshold limit provided in section III of Part II of Schedule XIII.
Further both the companies, from which the MD is drawing the remuneration is not having the adequate profit and we do not want to go for CG approval.
In the light of the above information could you tell me the maximum remuneration, the MD can withdraw.
Also want to know is there any latest amendment in schedule XIII, which waves the condition for approval of CG for any amount of remuneration drawn by the MD.
Really appreciate your efforts and interest shown in the query.
03 August 2024
Given the scenario where Mr. A is the Managing Director (MD) in two unlisted public companies and is drawing significant remuneration from each, here's a detailed look into the applicable regulations and potential options:
### **Understanding the Regulatory Framework:**
1. **Applicable Provisions:**
- **Schedule XIII of the Companies Act, 1956:** - **Limits on Managerial Remuneration:** For unlisted public companies, Schedule XIII of the Companies Act, 1956, provides limits on the remuneration payable to managerial personnel. These limits are contingent on the effective capital of the company. - **Effective Capital Slabs:** The slab of effective capital you mentioned (Rs. 5 crore to Rs. 25 crore) has specific limits for managerial remuneration.
- **Section III of Part II of Schedule XIII:** - This part specifies the limits for managerial remuneration, which are subject to Central Government approval if exceeded.
2. **Current Situation:**
- **Remuneration Exceeds Limits:** Mr. A’s annual remuneration of Rs. 24 lakhs from each company exceeds the thresholds set out in Section III of Part II of Schedule XIII.
- **Profitability Issues:** Both companies do not have adequate profits, which means that even if the remuneration falls within permissible limits, the companies might not be able to pay it without profit.
### **Options for Drawing Remuneration:**
1. **Seeking Central Government Approval:** - **Requirement:** Since Mr. A’s remuneration exceeds the limits specified in Schedule XIII, Central Government approval is required unless there have been changes in legislation or new notifications. - **No Exemption for High Remuneration:** There are no blanket exemptions for high remuneration without Central Government approval in the context of the Companies Act, 1956. If the remuneration exceeds the prescribed limits, approval is generally required.
2. **Maximum Permissible Remuneration:** - **Without Government Approval:** For the effective capital slab of Rs. 5 crore to Rs. 25 crore, the limits for managerial remuneration in Schedule XIII are: - **Single MD:** Typically around Rs. 12 lakhs per annum (or as updated by amendments or notifications). - **Total for All Managerial Personnel:** The total remuneration cannot exceed 10% of the net profits of the company or Rs. 12 lakhs (whichever is higher) for all managerial personnel. - **With Approval:** If the remuneration needs to exceed these limits, obtaining Central Government approval is necessary.
### **Latest Amendments and Circulars:**
1. **Companies Act, 2013:** - **Revised Regulations:** The Companies Act, 2013, replaced the Companies Act, 1956, and introduced updated regulations for managerial remuneration. Under the new Act, Schedule XIII was replaced by provisions in the Act itself. - **CG Approval under Companies Act, 2013:** The Companies Act, 2013, also requires Central Government approval for remuneration exceeding specified limits, similar to the Companies Act, 1956.
2. **Latest Notifications/Circulars:** - **No Waivers for High Remuneration:** There has been no recent circular or amendment that waives the requirement for Central Government approval for managerial remuneration exceeding the prescribed limits.
### **Summary:**
- **Remuneration Limits:** For the effective capital slab of Rs. 5 crore to Rs. 25 crore, the remuneration limits are around Rs. 12 lakhs per annum for a single MD, and higher if approved. - **Central Government Approval:** If the remuneration exceeds these limits, obtaining Central Government approval is required. - **No Exemptions:** There is no recent notification or circular that exempts high remuneration from needing Central Government approval.
### **Recommendation:**
- **Consult a Professional:** Given the complexity and potential legal implications, consulting with a legal or company secretary professional is advisable. They can provide up-to-date advice and assist with obtaining the necessary approvals if needed.
This ensures that you comply with all applicable laws and regulations while addressing any specific issues related to your company's situation.
CAclubindia
