Director's remuneration under co's act

For Private limited companies, Section 197 of the Companies Act 2013 does not prescribe any upper limit on directors’ remuneration.

Directors can be paid remuneration as decided by the board or under their service contract, subject to proper board and shareholder approvals if specified in the Articles of Association or company law.

While there is no explicit statutory limit for private companies, certain restrictions can be imposed by company Articles, loan covenants, or contractual agreements with banks/creditors.

The payment of remuneration should be transparent, following board and shareholder approvals, with proper documentation for tax and compliance purposes.

In a private limited company, withdrawing 75% of profit as directors’ remuneration is legally permissible under the Companies Act 2013, provided it is documented and passes necessary company resolutions.

However, such a large withdrawal could raise concerns regarding company liquidity, shareholder interests, and tax planning; it should be justified by business needs and follow tax and compliance norms.

The remuneration should be reasonable and defensible, especially for related-party transactions to avoid scrutiny under income tax and for proper shareholder transparency.