whose approval is required if company wants to pay remuneration to its manager in any of the following cases.
1) if remuneration to one manager exceeds 5% of net profit
2) if remuneration to more than one or whole directors exceeds 10% of net profit calculated as per sec198.
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Managerial remuneration sec197
Replies (4)
Section 197 of the Companies Act 2013, amended by Companies (Amendment) Act, 2017, is applicable on all the public companies and governs the provisions relating to managerial remuneration.
Case 1) Company would require approval in a general meeting by a special resolution if it wishes to propose remuneration in excess of 5% of the net profit for the manager (Assuming there is only one manager/ MD/ WTD)
Case 2) Company would require approval in a general meeting by a special resolution if it wishes to propose remuneration in excess of 10% of the net profit for more than one whole time directors.
Also it needs to be kept in mind that if the total managerial remuneration paid by the company exceed 11%, then earlier requirement of getting Government's approval has been done away with and now only an approval of general meeting is sufficient compliance of the Act.
thank you jain, so companies doesn't require approval of central government if they break the ceiling limit of 11% of net profit.henceforth, approval by special resolution would be enough if companies break the two aforesaid limits I.e 5% and 10%.
Yes exactly.
I hope I was able to help you with your query.
indeed you did help me, thanks a ton.
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