Is there any limit or criteria to decide remuneration of directors in Pvt Ltd co. or can be paid as per companies AOA
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Quick Summary
This discussion clarifies the rules around director remuneration for private limited companies. Unlike public companies, private limited companies generally have no statutory limits on how much they can pay their directors. The limits and criteria mentioned in the Companies Act primarily apply to public companies, meaning private companies have more flexibility in setting director pay.
A managerial person, a company has no profits or its its profits are inadequate, it may, pay remuneration to the managerial person not exceeding, the limits under (A) and (B) given below:-
(A):
(1) (2) Where the effective capital is Limit of yearly remuneration payable shall not exceed (Rupees) (i) Negative or less than 5 crores Remuneration 60 Lakhs (ii) 5 crores and above but less than 100 crores Remuneration 84 Lakhs (iii) 100 crores and above but less than 250 crores Remuneration120 Lakhs (iv) 250 crores and above Remuneration 120 lakhs plus 0.01% of the effective capital in excess of Rs. 250 crores
Or
Condition Max Remuneration in any financial year Company with one Managing director/whole time director/manager - 5% of the net profits of the company Company with more than one Managing director/whole time director/manager - 10% of the net profits of the company Overall Limit on Managerial Remuneration - 11% of the net profits of the company
Remuneration payable to directors who are neither managing directors nor whole-time directors For directors who are neither managing director or whole-time directors - 1% of the net profits of the company if there is a managing director/whole time director If there is a director who is neither a Managing director/whole time director - 3% of the net profits of the company if there is no managing director/whole time director
Sec 203 (Appointment of Managerial Personnel) and Sec 197 (Remuneration) are applicable only to Public Companies and therefore Pvt Companies are free to decide on their own.
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