remunaration of directors of pvt ltd co.

as per section 198 of companies act mnagerial remuneration and managerial remuneration in case of absence or inadequacy of profits.—



(1) The total managerial remuneration payable by a public company or a private company which is a subsidiary of a public company, to its directors and its 2[***] manager in respect of any financial year shall not exceed eleven per cent of the net profits of that company for that financial year computed in the manner laid down in sections 349 3[and 350], except that the remuneration of the directors shall not be deducted from the gross profits.


(2) The percentage aforesaid shall be exclusive of any fees payable to directors under sub-section (2) of section 309.



(3) Within the limits of the maximum remuneration specified in sub-section (1), a company may pay a monthly remuneration to its managing or whole-time director in accordance with the provisions of section 309 or to its manager in accordance with the provisions of section 387.



5[(4) Notwithstanding anything contained in sub-sections (1) to (3), but subject to the provisions of section 269, read with Schedule XIII, if, in any financial year, a company has no profits or its profits are inadequate, the company shall not pay to its directors, including any managing or whole-time director or manager, by way of remuneration any sum exclusive of any fees payable to directors under sub-section (2) of section 309, except with the previous approval of the Central Government.]



Explanation.—For the purposes of this section and sections 309, 310, 311, 6[***] 381 and 387, “remuneration” shall include,—



(a) any expenditure incurred by the company in providing any rent-free accommodation, or any other benefit or amenity in respect of accommodation free of charge, to any of the persons specified in sub-section (1);



(b) any expenditure incurred by the company in providing any other benefit or amenity free of charge or at a concessional rate to any of the persons aforesaid;



(c) any expenditure incurred by the company in respect of any obligation or service which, but for such expenditure by the company, would have been incurred by any of the persons aforesaid; and



(d) any expenditure incurred by the company to effect any insurance on the life of, or to provide any pension, annuity or gratuity for, any of the persons aforesaid or his spouse or child.]


 

Hi,

Section 198, 309, 310 etc. relating to remuneration is applicable to only public co. and private co. which is subsi of a public co.

It is not applicable to plain private co.

Therefore in case of plain private co, you can pay to the director as per your own choice. if AOA contain some provisions, then it is required to be followed.

Thanks

Rajeev Nayak

 who will decide the remuneration & also who decides managing director's remuneration?

Can you please give a clear idea/structure of setting payscale for Pvt. Ltd. Co? It will be helpful.

Hi,

In any case, the remuneration to will be decided by the Board whether in public or private co.

However In case of public co. same is also approved by the shareholders as per Schedule XIII and further other aspect like within the limit of Section 3069 etc. is also required to be complied with.

Coming back to the question of payment of remuneration to MD in case of plain private co., following procedure should be complied with:--

1. Call a Board Meeting and approve the payment of remuneration to MD. In case of plain Pvt. Co. there is no limit under Companies Act, 1956. Board has to decide the remunearion taking into consideration profitability, time devoted by MD etc.

2.  E-form 23 is required to be filed within 30 days with ROC under Section 192 of CA, 1956. As per Section 192 form 23 is required to be filed in case of Appointment, reappointment, variation in terms of appointment of MD.

If u require any other clarification, please feel free to write....

Thanks & Regards

Rajeev Nayak