Remuneration

I am new to this forum and have minimum exposure to Corporate law and hence sorry if my questions are basic.

Current Situation:

My Grandfather started a public limited company, After him My dad has been the Managing Director for the past 15 years. We have 5 Independent Board of directors.

Company: 60 yrs old Public limited (Share value issued is 5 Lakhs and its been in this limit for several years and shares are distributed to outsiders as well but we are not publicly listed)

Profit each year: around 60-90 Lakhs for the last 4 years

Reserve: 5 Cr ( 3.5 liquid assets in terms of deposits and rest stocks and real estate)

MD remuneration: 17 Lakhs/ Annum ( In adequacy of profit is shown for this, as per my knowledge)

Directors: 5 directors and they receive sitting fees for each meeting and do not have monthly remuneration.

Staff: 200

Question:

1) Now there is a situation that I need to enter the business (I have been earning 24 lakhs/ annum elsewhere). I have been told that I cannot take more that 40,000 salary every month since I am blood related to the Managing director (father/ son). How is this governed by the corporate law. I am curious how competency can be measured and why more salary can be given.

2) In future if we need to expand business and even hire white collars from outside at a higher salary, will this rule apply and what would be our limitations in giving salary

3) Is there any provision in the law that I can be given a better salary i.e 1 Lakh/ month considering my current employment and the value i bring in.

I tried reading myself in the forum and there are terminologies like form. 23, section III.....I am not getting it and I would like to know if there is a link which will help me self educate.

Please help me clarify this situation.

 

 

Replies (2)

1) I dont think there is any restrictions as such stating 40,000 as the maximum salary one can draw from a public limited company. There are certain disclosure aspects that has to be taken care of, otherwise I dont think there can be any restrictions provided that you have the required qualifications to take up the job, as you are stating that you have been earning around 24 Lakhs it shouldnt be a problem. Please enquire with the person who told you about the restriction whether they can give you the section no. under the companies act.

I have not been told that 40K is the limit but there is some limit of 10% of profit and hence my Dad's salary itself is under in adequacy of profit and mine cannot go beyond a minimum limit.

Can someone explain this scenario with Section quotes etc please

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