form 25A

MEANING OF THE "EFFECTIVE CAPITAL"

For the purpose of deciding remuneration payable to managerial persons in a company, the effective capital, which is the base for determining eligibility of remuneration, shall be calculated as on the last date of the financial year preceding the financial year in which the appointment is made.

For ascertaining the effective capital of a company for arriving at the maximum permissible remuneration, the following shall be considered and added:—

1. Paid-up share capital (excluding share application money and advances against shares);

2. Share premium account;

3. Reserves and surplus (excluding revaluation reserve); and

4. Long-term loans and deposits repayable after one year but excluding working capital loans, overdrafts, interest due on loans unless funded, bank guarantee and short-term arrangements.

The following amount shall be deducted:—

1. Investments (except in the case of investment company);

2. Accumulated losses;

3. Preliminary expenses not written off.

The net figure will be considered as the effective capital of a company. Where the appointment of the managerial person is made in the year in which the company has been incorporated, the effective capital shall be calculated on the date of such appointment on the abovesaid basis.

Everything is rightly clarified above.

Just for clarification, if you have appointed the managerial personnel in 2009 the effective capital shall be calculated for 31March, 2008.

Thanks and regards

Deepak Maharishi