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Approval of Director's salary in AGM

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Geetha Gupta

Accountant

265 Points Posted on 15 September 2020

Hello everybody,

A small company, where all are related to each other and are members as well as directors, has not got the remuneration paid to the directors approved in the AGM for the past years, eversince Secretarial Standards came into force. Even the remuneration paid for FY 2019-20 needs to be approved. All the increases and decreases were reported in the Board meetings and in Form AOC-2 every year.

Can a ordinary resolution be passed to approve the same? If so can someone suggest a resolution

Further, as a rule, for the future, can remuneration paid during a FY be approved in the following AGM, since it difficult to forecast profits for the company?

Thanks in advance and Regards,

Geetha Gupta

Replies (3)

Quick Summary

This discussion addresses the approval of director's salaries in a small, family-run company, particularly concerning past and upcoming AGMs. It clarifies whether an ordinary resolution is sufficient for approval and explores the feasibility of approving remuneration paid in a financial year at the subsequent AGM due to profit forecasting difficulties. While some initial advice points to mandatory disclosure for listed companies, a key clarification highlights that members' approval for remuneration is generally not required for private companies, making the process simpler.

Rama chary Rachakonda

Master in Accounts & high court Advocate

7021 Points Posted on 15 September 2020

Yes. It is a must. Every Listed Company will have to disclose in the Board’s report the ratio of the remuneration of each Director to the median employee’s remuneration and such other details as prescribed by the Central Government through the Rules. In view of the widespread debate in the country and abroad on the subject of excessive managerial pay, the purpose of bringing this provision appears to disclose to the shareholders the extent of pay comparison among employees and directors.