Remuneration of managing director

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Querist : Anonymous

Querist : Anonymous (Querist)

10 October 2012 there is one query regarding MD remuneration :

The company is Limited COmapny having paid up capital of Rs. 25,07,000. The company yet not confirmed abt the remuneration given to that particular managing director and now I want to know what is the maximum remuneration comapny can give to that md as per schedule XIII of the companies act,1956 because we have to file form number 23 and 25C in which remuneration of managing director requires to disclose.

And also confirm me that if company will file remuneration of MD is Rs. 75000p.m. and in actual give 60000 p.m. then their is any problem as per the act.

Sunil

Sunil (Expert)
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10 October 2012 In Ltd. company you have to get the remuneration authorised by shareholders and approved by CG. If you get an amount approved and charge it to your profit and loss account, in hands of MD it is salary earned or due even though not paid and taxable. You have to do TDS. If you make a variation in contract to a lower amount and ratify it with shareholders and CG then there is no problem.

Ajay Mishra

Ajay Mishra (Expert)
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10 October 2012 Hi

Payment of Managerial Remuneration

The total managerial remuneration payable by a public company to its directors or manager in respect of any financial year shall not exceed 11% of the net profit of the company for that financial year computed in manner laid down in section 198(1) of the Companies Act, 1956.

Remuneration payable to MD or WTD shall not exceed 5% of the net profit for one such director and if there is more than one such director, 10 % for all of them together.

Section 198, 309 and Schedule XIII are not mutually exclusive. If the company have adequate profit then the company will paid remuneration under Section I of Part II of Schedule XIII and in case of inadequate profit the company will pay remuneration as per Section II of Part II of Schedule XIII.
The provision of managerial remuneration will not apply to private limited company.

Regards

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Sunil

Sunil (Expert)
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10 October 2012 Agreed with Ajay Mishra. Still the requirement stands for obtaining necessary approvals. However, the question it seems is if a lower amount than that approved or permissible is paid out. Now if they reflect in books that the permissible amount is payable but paid less than that it is still taxable on due basis at hand of MD and accordingly company has to do TDS if it accounts the expense of remuneration.

Querist : Anonymous

Querist : Anonymous (Querist)

11 October 2012 BUt my query is that if the company has inadequate profits then the schedule XIII part II will be applicable and as per the same criteria I am Re appointing the MD with the Remuneration of Rs. 75000/- and filing Form 25C and Form 23 because there is no problem because the company has not defaulted in paying debts n there is no remuneration committee so approval has been taken from BOD

Ajay Mishra

Ajay Mishra (Expert)
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11 October 2012 Hi

As per Schedule XIII Part II section II which deal with remuneration payable by company having inadequate profit or no profit.

As per 1 (A) of such section if your company effective capital is less than 1 crore then you can pay remuneration to your director subject to the following condition:
1. Approval of such remuneration by Remuneration committee
2. Not defaulted in payment of any debts.

The details of remuneration which you have paid should also be mentioned in your Balance sheet.

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Querist : Anonymous

Querist : Anonymous (Querist)

15 October 2012 But Sir if our company do not have any remuneration committee then what to do because our company is not listed one

Ajay Mishra

Ajay Mishra (Expert)
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15 October 2012 Schedule XIII will be applicable for both public listed company and public unlisted company.

For, unlisted public company remuneration committee is required to be constitute as per Explanation IV of Schedule XIII.

Ajay Mishra

Ajay Mishra (Expert)
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15 October 2012 Meaning of Remuneration Committee as explained under Explanation IV to the Section II of Part II has been substituted by Notification No GSR 70 (E), dates 08.02.2011, namely:-
For the purpose of this section, “Remuneration Committee” means:
(i) In respect of a listed company, a committee which consists of at least three non-executive independent directors including nominee director or nominee directors, if any; and
(ii) In respect of any other company, a Remuneration Committee of directors.