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Meaning of inadequacy of profit in schedule xiii

Amit Kumar Verma (CA Final CS Professional) (501 Points)

22 August 2012

Can anyone tell me the meaning of the word used "In the case of Inadequecy of Profit" in Schedule XIII of the Companies Act.

Thanks..

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2 Replies

CA Ashish Pathak (Employed at Cipla Ltd.) (2779 Points)
Replied 22 August 2012

Hello Amit, Schedule-XIII empowers a company to pay minimum remuneration to its managerial person, even in case of inadequacy of profits or no profits. Here "inadequate profits" means profits are not sufficient to pay the remuneration. In other words the net profits before managerial remuneration are so inadequate that if remuneration is paid then it will result in loss to the company.

Sanjay Suresh (Student) (98 Points)
Replied 24 August 2012

It is related to payment of managerial remuneration. Managerial remuneration is to be paid at a fixed amount even in cases where the company is undergoing loss or does not have sufficient profits to make such payments.