Remuneration paid to wtd and md

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riddhi (Querist)
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27 June 2012 Please guide me as to what has to be done in case if PVt company subsidiary of Limited company has occured loss during the year 2011-2012 inspite of that have paid remuneration as fixed at the time of appointment of WTD and MD which is in excess to ceiling fixed under sch XIII Part -II (B).

can we treat the excess amount as advance given to directors i.e. an arrangement which falls under 299? If yes is there violation of CARO could CARO report be qualified.

Else please suggest me the way so that in any case we dont have to move to central govt for approval.

Ajay Mishra

Ajay Mishra (Expert)
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27 June 2012 Hi

This is cover under section 198(4) of the Companies Act, 1956.

Compliance of section 198(4) has to be ensured for each financial year. The provision says" if in any year, a company has no profits, or inadequate profits". Therefore, if remuneration of managerial person has been initially fixed in accordance with the provision of Section I of Part II of Schedule XIII in view of the availability of adequate net profits at the relevant time, the provisions of Section II of Part II shall become autometically applicable to him in any financial year in which the company has no profits or profits or inadequate. As a consequence therof, his remuneration during such financial year will have to be re-fixed so as to confirm the provisions of Schedule XIII.

Regards

riddhi

riddhi (Querist)
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04 July 2012 and what about the excess been paid to them in earlier months over and above the celing limits of part II

Ajay Mishra

Ajay Mishra (Expert)
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04 July 2012 Hi

It will be refund by him if it is not approved by shareholders or necessary approval was not obtained.

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