MD & WTD remuneration and 198

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abvvora (Querist)
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01 September 2009 Company has to comply section 198 and 309 for managerial remuneration. Suppose upto 25 March, 2009 company is having sufficient profit ex. Rs. 25 Crore. But due to some reasons say fluctuation in currency exchange rate or government policy or heavy loss etc. and profit came down to Rs. 2 crore only and remuneration paid for 11 months is exceeding the limit as specified in company law is breached. So what steps to be taken?
Another thing is that how company can anticipate its net profit as per Section 349 to comply Section 198?
Can we ask MD and WTDs to refund the excess remuneration?
Can we ask them to give undertaking that if approval from ROC is not received than excess remuneration can be deducted in the current year?
Is it necessary to have prior approval of RoC? If yes, in the above case it is practically difficult to have prior approval in the above case.
Kindly request you to guide me. It is very urgent.

Ankur Garg

Ankur Garg (Expert)
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01 September 2009 Excess remuneration, if any, paid to directors
If any director draws remuneration in excess of the limits provided in section 309 or without the approval of the Central Government, where required, he shall refund such excess to the company unless on an application made by the company, the Government waives the recovery for good and sufficient reasons. The application may be made in the form of a letter after it is approved by the Board. Such waiver of excess remuneration also requires the approval of members.

Ankur Garg

Ankur Garg (Expert)
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01 September 2009 The relevant section for refund of excess remuneration is section 309 (5A) and (5B) of the companies act, 1956.

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