Managerial Remuneration

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abvvora (Querist)

13 August 2009 A company wants give fees instead of remuneration to Managing Director for service rendered to the comapny.

Is it possible?
whether 297, 3001 will cover?
CARO report should disclose this?

Ankur Garg

Ankur Garg (Expert)

13 August 2009 Hi,

Yes. A company can give fees instead of remuneration to Managing Director for service rendered to the comapny.

I would like to draw your kind attention towards proviso to Section 309(1) which reads as follows:

“Provided that any remuneration for services rendered by any such director in any other capacity shall not be so included if –
(a) the services rendered are of a professional nature, and
(b) in the opinion of the Central Government, the director possesses the requisite qualifications for the practice of, the profession]. “

Thus on the basis of above provision if your director is holding professional qualification in the opinion of CG then such fees shall not be considered as remuneration otherwise it shall be counted in managerial remuneration and you have to fulfill the provisions of managerial remuneration.

Provisions of managerial remuneration are governed by Section 198, 309,310 and 311 read with Schedule XIII. However if your company is a private limited company then provisions of managerial remuneration shall not apply.

Section 297 and 301 shall not apply.

In proviso to Section 309(1) above you have to file application to CG in order to obtain CG approval.

Best Regards

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