Maximum remunaration paid to director(s) of a public company
This query is : Resolved
13 June 2013
can anybody tell me the Maximum remunaration paid to director(S) of a public company.asap
Thanks in advance.
Thanks in advance.
21 June 2013
Hi
Total ceiling of managerial remuneration:
Section 198(1) relates to overall maximum managerial remuneration and managerial remuneration in case of absence or inadequacy of profits. The total managerial remuneration payable by a public company or a private company which is a subsidiary of a public company, to its directors and its manager in respect of any financial year shall not exceed 11% of the net profits of the company for that financial year. Such net profits shall be computed in a manner laid down under sections 349 and 350, except that the remuneration of the directors shall not be deducted from the gross profits.
Remuneration is payable to all the directors including managing and whole-time directors and in any capacity. Therefore, it includes the remuneration for services rendered by him in any other capacity other than that of a director.
Proviso of section 309(1) excludes any remuneration for professional services rendered by a director, provided that the director possesses requisite professional qualification for practicing the profession in respect of which they render special services. It is immaterial, whether the professional fees, which are paid to him is on a monthly basis or on a case to case basis. [Stup Consultants Ltd. v Union of India].
If a director of the company is working as a technical adviser to the company and is paid remuneration by way of monthly salary, his salary will be included in the 11% managerial remuneration.
Total ceiling of managerial remuneration:
Section 198(1) relates to overall maximum managerial remuneration and managerial remuneration in case of absence or inadequacy of profits. The total managerial remuneration payable by a public company or a private company which is a subsidiary of a public company, to its directors and its manager in respect of any financial year shall not exceed 11% of the net profits of the company for that financial year. Such net profits shall be computed in a manner laid down under sections 349 and 350, except that the remuneration of the directors shall not be deducted from the gross profits.
Remuneration is payable to all the directors including managing and whole-time directors and in any capacity. Therefore, it includes the remuneration for services rendered by him in any other capacity other than that of a director.
Proviso of section 309(1) excludes any remuneration for professional services rendered by a director, provided that the director possesses requisite professional qualification for practicing the profession in respect of which they render special services. It is immaterial, whether the professional fees, which are paid to him is on a monthly basis or on a case to case basis. [Stup Consultants Ltd. v Union of India].
If a director of the company is working as a technical adviser to the company and is paid remuneration by way of monthly salary, his salary will be included in the 11% managerial remuneration.
21 June 2013
A director who is not a managing or whole-time director may be paid sitting fees for attending meetings of the Board or of the committee of directors.
Sitting fees paid for attending meeting are excluded from overall managerial remuneration ceiling
The limit of 11% of the net profits on overall maximum managerial remuneration shall be exclusive of any sitting fees payable to directors for attending each meeting of the Board or committee.
A director who is not a managing or whole-time director may be paid sitting fees for attending meetings of the Board or of the committee of directors.
Sitting fees paid for attending meeting are excluded from overall managerial remuneration ceiling
The limit of 11% of the net profits on overall maximum managerial remuneration shall be exclusive of any sitting fees payable to directors for attending each meeting of the Board or committee.
21 June 2013
Ceiling on remuneration of ordinary or non-executive directors:
Sections 309(4) and 309(7) deals with remuneration payable to the part time directors, that is to say the directors who are neither in the whole-time employment of the company nor a managing director, within the overall limit stipulated in section 198(1) and further in section 309(4) itself.
Section 309(4) authorises payment of remuneration to part time directors in two alternative ways:—
(i) by way of monthly, quarterly or annual payment with the approval of the Central Government; and/or
(ii) by way of commission without the approval of the Central Government, subject to the approval of the members by way of special resolution.
Therefore, if the commission payable exceeds the limit, payment can be made only with the approval of the Central Government.
Quantum of commission that may be paid to non-executive directors:
Section 309(4) provides that a director or directors who is/are not managing or whole-time directors may be paid remuneration periodically with the approval of the Central Government or may be paid commission, provided the said remuneration shall not exceed 1% of the net profits if the company has a managing or whole-time director and 3% in other cases. The net profits shall be computed in terms of sections 198, 349 and 350 of the Act.
Ceiling on remuneration of ordinary or non-executive directors:
Sections 309(4) and 309(7) deals with remuneration payable to the part time directors, that is to say the directors who are neither in the whole-time employment of the company nor a managing director, within the overall limit stipulated in section 198(1) and further in section 309(4) itself.
Section 309(4) authorises payment of remuneration to part time directors in two alternative ways:—
(i) by way of monthly, quarterly or annual payment with the approval of the Central Government; and/or
(ii) by way of commission without the approval of the Central Government, subject to the approval of the members by way of special resolution.
Therefore, if the commission payable exceeds the limit, payment can be made only with the approval of the Central Government.
Quantum of commission that may be paid to non-executive directors:
Section 309(4) provides that a director or directors who is/are not managing or whole-time directors may be paid remuneration periodically with the approval of the Central Government or may be paid commission, provided the said remuneration shall not exceed 1% of the net profits if the company has a managing or whole-time director and 3% in other cases. The net profits shall be computed in terms of sections 198, 349 and 350 of the Act.
21 June 2013
Central Government's approval:
Although the section prescribes that the approval of the Central Government is necessary only for payment of fixed remuneration to non-executive directors, it is found that the Department is of the view that a company cannot pay commission to non-executive directors based on 1% or 3% of net profits, as the case may be, without the prior approval of that government on the ground that any such payment would mean increase in the remuneration to a director which would attract the provisions of section 310 and thus need the approval of the Central Government.
The Government's view is that where directors receive fees for Board meetings attended by them, proposal for payment of commission or other remuneration to them would mean increase in remuneration under section 310. However, where the directors do not receive Board meeting fees or other remuneration, Central Government's approval is required as any remuneration proposed to be paid will be deemed to be an increase in remuneration and will require approval of the Government under section 310 and also approval of members by special resolution.
The special resolution passed under section 310(4)(b) is valid for a period of 5 years at a time, it may be renewed for a further period of five years at a time and any renewal must be done not earlier than one year from the date on which it is to come into force.
Central Government's approval:
Although the section prescribes that the approval of the Central Government is necessary only for payment of fixed remuneration to non-executive directors, it is found that the Department is of the view that a company cannot pay commission to non-executive directors based on 1% or 3% of net profits, as the case may be, without the prior approval of that government on the ground that any such payment would mean increase in the remuneration to a director which would attract the provisions of section 310 and thus need the approval of the Central Government.
The Government's view is that where directors receive fees for Board meetings attended by them, proposal for payment of commission or other remuneration to them would mean increase in remuneration under section 310. However, where the directors do not receive Board meeting fees or other remuneration, Central Government's approval is required as any remuneration proposed to be paid will be deemed to be an increase in remuneration and will require approval of the Government under section 310 and also approval of members by special resolution.
The special resolution passed under section 310(4)(b) is valid for a period of 5 years at a time, it may be renewed for a further period of five years at a time and any renewal must be done not earlier than one year from the date on which it is to come into force.
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