Re: Managerial Remuneration- pls advice

Agree with your observations

Consider the below mentioned observations:

1. Remuneration can be increased with retrospective effect.

2. Re-appointment can not be approved with retrospective effect.

3. Select the suitable table of remuneration from schedule XIII as per your requrement and complete the legal requirement of selected table.

4. Schedule XIII remuneration is applicable for all kind of directors on board.

Thanks

Dear Manoj Ji,

Form 25C would not required.

All the resolution in General Meeting would be Special Resolution and you have to file form 23 only. Secondly the remuneration must be within the limits pescribed under schedule XIII.

Dear Manoj Ji,

As per point no. 2 mentioned by you which states that last appointment was made on 01/03/2009 for a period of three years there is no need to reappoint the MD who is already appointed for a period of 3 years, this is just a case of increase of remuneration for which remuneration committee approval is required and than hold a BM in which call EGM, pass the Special Resolutuion and File Form 23..... No need to file Form 25C. Further increase in remuneration can be w.e.f. 01/04/2010.

Regards

ACS Vaibhav Shukla

Thank u so much sirs for your reply

Mr. Srivastava Sir,

As u said in all case the special resolution will be required but Schedule XIII part III only said the resolution in general meeting is required so can we not pay the remuneration by passing Ordinary Resolution only??? (In case of WTD) As the remuneration of two WTD is falling in the situation1 of Part II of Schedule XIII..

And

Mr. Shukla sir,

pls tell me whether the increased remuneration can only be paid for the remaining period of their tenure or we can pass resolution for further three years without appointing the same person in that egm.

Pls reply

Dear Manoj,

Remuneration can be paid till the remaining period  and after the expiry of that period re- appointment is to be made on fresh terms.

Regards

Vaibhav shukla

Originally posted by : manoj kumar
	Thank u so much sirs for your reply   Mr. Srivastava Sir,   As u said in all case the special resolution will be required but Schedule XIII part III only said the resolution in general meeting is required so can we not pay the remuneration by passing Ordinary Resolution only??? (In case of WTD) As the remuneration of two WTD is falling in the situation1 of Part II of Schedule XIII.. And Mr. Shukla sir, pls tell me whether the increased remuneration can only be paid for the remaining period of their tenure or we can pass resolution for further three years without appointing the same person in that egm.   Pls reply

Dear Manoj JI,

Special Resolution is requied in all cases except situation 1 of Section II of schedule XIII.

Sir,

i study hard but could not found any where that in case of remuneration to WTD within the limit specified in situation1 of Part II of Schedule XIII require Special Resolution.

Pls clarify....

Dear Manoj,

If you will go through exactly what is written by Mr. Ankur Srivastava you will find that your hard work is not enough (special resolution is required in all cases EXCEPT situation 1 of SECTION II of SCHEDULE XIII).                                                                                                                                                                                                        You are requested to please go thoroughly in to the subject matter before coming up with such tough comments.

Regards

ACS VAIBHAV

Dear Manoj Ji,

Please find the relevant material:-

Section II.—Remuneration payable by companies having no profits or inadequate profits

2[1. Notwithstanding anything contained in this Part, where in any financial year during the currency of tenure of the managerial person, a company has no profits or its profits are inadequate, it may pay remuneration to a managerial person by way of salary, dearness allowance, perquisites and any other allowances,—

(A) not exceeding the ceiling limit of Rs. 24,00,000 per annum or Rs. 2,00,000 per month calculated on the following scale:—

———————— ————————————————————————————

Where the effective capital of Company is          Monthly remuneration payable shall not exceed

(Rupees)

————————————————————————————————————

(i) less than rupees 1 crore                                                                                 75,000

(ii) rupees 1 crore or more but less than rupees 5 crores                                      1,00,000

(iii) rupees 5 crores or more but less than rupees 25 crores                                  1,25,000

(iv) rupees 25 crores or more but less than rupees 50 crores                                1,50,000

(v) rupees 50 crores or more but less than rupees 100 crores                               1,75,000

(vi) rupees 100 crores or more                                                                           2,00,000:

———————— ————————————————————————————

Provided that the ceiling limits specified under this subparagraph shall apply, if—

(i) payment of remuneration is approved by a resolution passed by the Remuneration Committee;

(ii) the company has not made any default in repayment of any of its debts (including public deposits) or debentures or interest payable thereon for a continuous period of thirty days in the

preceding financial year before the date of appointment of such managerial person;

(B) not exceeding the ceiling limit of Rs. 48,00,000 per annum or Rs. 4,00,000 per month calculated on the following scale:—

————————————————————————————————————

Where the effective capital of Company is                      Monthly remuneration

payable shall not exceed

(Rupees)

————————————————————————————————————

(i) less than rupees 1 crore                                                                     1,50,000

(ii) rupees 1 crore or more but less than rupees 5 crores                         2,00,000

(iii) rupees 5 crores or more but less than rupees 25 crores                      2,50,000

(iv) rupees 25 crores or more but less than rupees 50 crores                    3,00,000

(v) rupees 50 crores or more but less than rupees 100 crores                   3,50,000

(vi) rupees 100 crores or more                                                               4,00,000:

———————— ————————————————————————————

Provided that the ceiling limits specified under this subparagraph shall apply, if—

(i) payment of remuneration is approved by a resolution passed by the Remuneration Committee;

(ii) the company has not made any default in repayment of any of its debts (including public deposits) or debentures or interest payable thereon for a continuous period of thirty days in the

preceding financial year before the date of appointment of such managerial person;

(iii) a special resolution has been passed at the general meeting of the company for payment of remuneration for a period not exceeding three years;

(iv) a statement alongwith a notice calling the general meeting referred to in clause (iii) is given to the shareholders containing the following information, namely:—

I. General Information:

(1) Nature of industry.

(2) Date or expected date of commencement of commercial production.

(3) In case of new companies, expected date of commencement of activities as per project approved by financial institutions appearing in the prospectus.

(4) Financial performance based on given indicators.

(5) Export performance and net foreign exchange collaborations.

(6) Foreign investments or collaborators, if any.

II. Information about the appointee:

(1) Background details.

(2) Past remuneration.

(3) Recognition or awards.

(4) Job profile and his suitability.

(5) Remuneration proposed.

(6) Comparative remuneration profile with respect to industry, size of the company, profile of the position and person (in case of expatriates the relevant details would be w.r.t. the

country of his origin).

(7) Pecuniary relationship directly or indirectly with the company, or relationship with the managerial personal, if any.

III. Other information:

(1) Reasons of loss or inadequate profits.

(2) Steps taken or proposed to be taken for improvement.

(3) Expected increase in productivity and profits in measurable terms.

IV. Disclosures:

(1) The shareholders of the company shall be informed of the remuneration package of the managerial person.

(2) The following disclosures shall be mentioned in the Board of Director's report under the heading "Corporate Governance", if any, attached to the annual report:—

(i) All elements of remuneration package such as salary, benefits, bonuses, stock options, pension, etc. of all the directors;

(ii) Details of fixed component and performance linked incentives along with the performance criteria;

(iii) Service contracts, notice period, severance fees;

(iv) Stock option details, if any, and whether the same has been issued at a discount as well as the period over which accrued and over which exercisable.

(C) exceeding the ceiling limit of Rs. 48,00,000 per annum or Rs. 4,00,000 per month calculated on the following scale:—

———————— ————————————————————————————

Where the effective capital                                                        Monthly remuneration

of Company is                                                                           payable exceed (Rupees)

———————— ————————————————————————————

(i) less than rupees 1 crore                                                                                 1,50,000

(ii) rupees 1 crore or more but less than rupees 5 crores                                     2,00,000

(iii) rupees 5 crores or more but less than rupees 25 crores                                  2,50,000

(iv) rupees 25 crores or more but less than rupees 50 crores                                3,00,000

(v) rupees 50 crores or more but less than rupees 100 crores                               3,50,000

(vi) rupees 100 crores or more                                                                           4,00,000:

———————— ————————————————————————————

Provided that the ceiling limits specified under this subparagraph shall apply, if—

(i) payment of remuneration is approved by a resolution passed by the Remuneration Committee;

(ii) the company has not made any default in payment of any of its debts (including public deposits) or debentures or interest payable thereon for a continuous period of thirty days in the

preceding financial years before the date of appointment of such managerial person;

(iii) a special resolution has been passed at the general meeting of the company for payment of remuneration for a period not exceeding three years;

(iv) a statement along with a notice calling the general meeting referred to in clause (iii) is given to the shareholders containing the following information, namely:—

I. General Information:

(1) Nature of industry.

(2) Date or expected date of commencement of commercial production.

(3) In case of new companies, expected date of commencement of activities as per project approved by financial institutions appearing in the prospectus.

(4) Financial performance based on given indicators.

(5) Export performance and net foreign exchange collaborations.

(6) Foreign investments of collaborators, if any.

II. Information about the appointee:

(1) Background details.

(2) Past remuneration.

(3) Recognition or awards.

(4) Job profile and his suitability.

(5) Remuneration proposed.

(6) Comparative remuneration profile with respect to industry, size of the company, profile of the position and person (in case of expatriates the relevant details would be w.r.t. the country of his origin).

(7) Pecuniary relationship directly or indirectly with the company, or relationship with the managerial personnel,  if any.

III. Other information:

(1) Reasons of loss or inadequate profits.

(2) Steps taken or proposed to be taken for improvement.

(3) Expected increase in productivity and profits in measureable terms.

IV. Disclosures:

(1) The shareholders of the company shall be informed of the remuneration package of the managerial person.

(2) The following disclosures shall be mentioned in the Board of Director's report under the heading "Corporate Governance", if any attached to the annual report:—

(i) All elements of remuneration package such as salary, benefits, bonuses, stock options, pension, etc. of all the directors;

(ii) Details of fixed component and performance linked incentives along with the performance criteria;

(iii) Service contracts, notice period, severance fees;

(iv) Stock option details, if any, and whether the same has been issued at a discount as well as the period over which accrued and over which exercisable:

Provided further that the conditions specified in sub-paragraph (C) shall apply in the case the effective capital of the company is negative:

Provided also that the prior approval of the Central Government is obtained for payment of remuneration on the above scale.]

1[(D) not exceeding Rs. 2,40,00,000 per annum or Rs. 20,00,000 per month in respect of companies in Special Economic Zones as notified by Department of Commerce from time to time:

Provided that these companies have not raised any money by public issue of shares or debentures in India:

Provided further that such companies have not made any default in India in repayment of any of its debts (including public deposits) or debentures or interest payable thereon for a continuous period of thirty days in any financial year.]

2. A managerial person shall also be eligible to the following perquisites which shall not be included in the computation of the ceiling on remuneration specified in paragraph 1 of this section:

(a) contribution to provident fund, superannuation fund or annuity fund to the extent these either singly or put together are not taxable under the Income-tax Act, 1961,

(b) gratuity payable at a rate not exceeding half a month's salary for each completed year of service, and

(c) encashment of leave at the end of the tenure.

3. In addition to the perquisites specified in paragraph 2 of this section, an expatriate managerial person (including a non-resident Indian) shall be eligible to the following perquisites which shall not be included in the computation of the ceiling on remuneration specified in paragraph 1 of this section:

(a) Children's education allowance: In case of children studying in or outside India, an allowance limited to a maximum of Rs. 5,000 per month per child or actual expenses incurred, whichever is less. Such allowance is admissible upto a maximum of two children.

(b) Holiday passage for children studying outside India/family staying abroad: Return holiday passage once in a year by economy class or once in two years by first class to children and to the members of the family from the place of their study or stay abroad to India if they are not residing in India with the managerial person.

(c) Leave travel concession: Return passage for self and family in accordance with the rules specified by the company where it is proposed that the leave be spent in home country instead of anywhere in India.

Explanation I.—For the purposes of section II of this Part, 'effective capital' means the aggregate of the paid-up share capital (excluding share application money or advances against shares); amount, if any, for the time being standing to the credit of share premium account; reserves and surplus (excluding revaluation reserve); long-term loans and deposits repayable after one year (excluding working capital loans, over-drafts, interest due on loans unless funded, bank  guarantee, etc., and other short-term arrangements) as reduced by the aggregate of any investments (except in the case of investment by an investment company whose principal business is acquisition of shares, stock debentures or other securities), accumulated losses and preliminary expenses not written off.

Explanation II.—(a) Where the appointment of the managerial person is made in the year in which company has been incorporated, the effective capital shall be calculated as on the date of such appointment;

(b) In any other case, the effective capital shall be calculated as on the last date of the financial year preceding the financial year in which the appointment of the managerial person is made.

Explanation III.—For the purposes of section II of this Part, family means the spouse, dependent children and dependent parents of the managerial person.

1[Explanation IV.—For the purposes of this section, 'Remuneration Committee' means that a committee which consists of at least three non-executive independent directors including nominee director or nominee directors, if any.

Explanation V.—For the purposes of this clause, the Remuneration Committee while approving the remuneration under this section shall,—

(a) take into account, financial position of the company, trend in the industry, appointee's qualification, experience, past performance, past remuneration, etc.

(b) be in a position to bring about objectivity in determining the remuneration package while striking a balance between the interest of the company and the shareholders.

Explanation VI.—For the purposes of Paragraph I, "negative effective capital" means the effective capital which is calculated:—

(a) in accordance with the provisions contained in Explanation I of this Part;

(b) less than zero.]

2[Section III — Remuneration payable to a managerial person in two companies Subject to the provisions of section I and II, a managerial person shall draw remuneration from one or both companies, provided that the total remuneration drawn from the companies does not exceed the higher maximum limit admissible from any one of the companies of which he is a managerial person.]

Regards,

Dear Sirs,

with reference to my original quiery, this wat i wanna say that  the remuneration payable to other two WTD is falling within the situation 1 of section-II of Part-II of Schedule XIII, so in that case do we require to pass Special Resolution.

i m sory if i hurt anyone but that was unintentional.

Section II.—Remuneration payable by companies having no profits or inadequate profits

2[1. Notwithstanding anything contained in this Part, where in any financial year during the currency of tenure of the managerial person, a company has no profits or its profits are inadequate, it may pay remuneration to a managerial person by way of salary, dearness allowance, perquisites and any other allowances,—

(A) not exceeding the ceiling limit of Rs. 24,00,000 per annum or Rs. 2,00,000 per month calculated on the following scale:—

———————— ————————————————————————————

Where the effective capital of Company is          Monthly remuneration payable shall not exceed

(Rupees)

————————————————————————————————————

(i) less than rupees 1 crore                                                                                 75,000

(ii) rupees 1 crore or more but less than rupees 5 crores                                      1,00,000

(iii) rupees 5 crores or more but less than rupees 25 crores                                  1,25,000

(iv) rupees 25 crores or more but less than rupees 50 crores                                1,50,000

(v) rupees 50 crores or more but less than rupees 100 crores                               1,75,000

(vi) rupees 100 crores or more                                                                           2,00,000:

———————— ————————————————————————————

Provided that the ceiling limits specified under this subparagraph shall apply, if—

(i) payment of remuneration is approved by a resolution passed by the Remuneration Committee;

(ii) the company has not made any default in repayment of any of its debts (including public deposits) or debentures or interest payable thereon for a continuous period of thirty days in the

preceding financial year before the date of appointment of such managerial person;

For Situation I Part-II of Sch XIII no need to pass SR as already said by Ankur & Vaibhav Sir.

Regards,