Company Secretary and Compliance Officer
114783 Points
Joined January 2009
Lets discuss in a simple way:
Suppose in a financial year your profit are: Rs. 10,00,00,000
Remuneration of M.D. is Rs. 50,00,000 i.e. 5%. Till now everything is fine.
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Now suppose in the next financial year profit fall to Rs. 8,00,00,000.
and remuneration remain the same i.e. Rs. 50,00,000. Now % of remuneration will automatically increase to 6.25%.
This is called inadequate profit as far as remuneration provisions are concerned.
On the contrary if you are able to maintain your profits say Rs. 10,00,00,000 or more then there will be no situation of inadequate profit as far as remuneration provisions are concerned.
However the same is my personal understanding about adequate/inadequate profit as far as remuneration provisions are concerned.
Regards