Remuneration of directors of public company

Archana (Company Secretary) (165 Points)
Replied 04 January 2012

yes file form 23 for variation in terms and conditions of appointment of MD /WTD by passing special resolution.

(Guest)

Dear Mr. Asawa, Company is not required to pass special resolution and is not required to file form no. 23 for revision in the monthly remuneration of the Managing Director & Whole Time Director. Company is also not required to note revision in the monthly remuneration by Remuneration Committee & Board of directors. Since in the resolution for appointment of MD and WTD, it is mentioned that : “In the event of absence or inadequacy of net profits in any financial year of the company during the tenure, the remuneration shall be governed by Section II of Part II of Schedule XIII of the Companies Act, 1956 or any statutory modification thereof.” Hence you can pay permissible remuneration as per schedule XIII. Also 1.25 Lacs (permissible remuneration as per schedule XIII) is less than 1.50 lacs hence no need to vary terms of remuneration.

CS Ankur Srivastava (Company Secretary & Compliance Officer) (17848 Points)
Replied 04 January 2012

Dear Sir,

As per your query it is observed that Table A of Schedule XIII is applicable in your case. In the case of Table A, only Ordinary Resolution were required and in case of WTD form 23 was also not required.

Secondly, now you have to pass Ordinary Resolution to revise the terms of appointment and file form 23 for MD only.

(Guest)

Hi Ankur, Why Ordinary resolution will be passed for variation of terms of appointment ? Does the authority given in the resolution is not enough for payment of Rs. 1.25 Lacs as remuneration to managing director. According to me there is no need to pass ordinary resolution for payment of Rs. 1.25 Lacs as it can very well be paid since present resolution states - “In the event of absence or inadequacy of net profits in any financial year of the company during the tenure, the remuneration shall be governed by Section II of Part II of Schedule XIII of the Companies Act, 1956 or any statutory modification thereof.” State relevant provision requiring passing of OR in GM.

CS Ankur Srivastava (Company Secretary & Compliance Officer) (17848 Points)
Replied 04 January 2012

Dear Neha,

The appointing body can only has power to variate the terms or remove the person. If the terms have been finalised by the General Body then it has power to amend it.

Secondly, where Schedule XIII is applicable the resolution is to be approved by the Shareholders by way of Special or Ordinary Resolution accordingly.

(Guest)

Dear Ankur, I fully agree that appointing body has power to variate the terms or remove the person. If the terms have been finalised by the General Body then it has power to amend it. But According to me there is no need to vary terms of remuneration. Earlier resolution passed in GM is sufficient to pay 1.25 Lacs remuneration in the absence or inadequate profit. Basically i m not convinced about the need to vary terms of remuneration. Kindly cite relevant provision/ section requiring mandatory variation of terms in the absence of profits. Hope to hear soon! R/Neha

(Guest)

Ankur, I await your reply!

CS Ankur Srivastava (Company Secretary & Compliance Officer) (17848 Points)
Replied 05 January 2012

Dear Neha,

The resolution says that:

“In the event of absence or inadequacy of net profits in any financial year of the company during the tenure, the remuneration shall be governed by Section II of Part II of Schedule XIII of the Companies Act, 1956 or any statutory modification thereof.”

According to the resolution that in case of inadequacy of profits part II of schedule XIII would apply. Accordingly, that part would apply as per that resolution. Then afer you need to comply that part of schedule xiii.

Therefore, the resolution is to be approved by the Shareholders by way of Special or Ordinary Resolution accordingly

(Guest)

Dear Ankur, Here I have a doubt. But table A of Part II of Sch XIII requires only passing of Resolution by remuneration committee and not by general meeting. Regards, Neha

CS Ankur Srivastava (Company Secretary & Compliance Officer) (17848 Points)
Replied 05 January 2012

Yes, in this case Ordinary Resolution is required.

Parashar (Company Secretary 2004) (1013 Points)
Replied 05 January 2012

Neha is correct, nothing is supposed to be done as there is no variation in the terms of the appointment, the situation which arose in the company is automatic ie insufficiency of fund which governs no change in the appointment terms so condition of salary at less percentage is already been decided at the time of appointment, I agree with Neha.

(Guest)

Ankur, At the end of the financial year we will come to know abt exact profit for that FY say 2011-2012. And certainly after the end of 2011-2012 when accounts are finalised say in the month of aug 2012, we comes to know that part II of schedule XIII is applicable on us. So do we have to pass Ordinary Resolution in the month of Aug 2012 by convening General meeting. Or we can pass the same in AGM which is supposed to be held in sept 2012. Basically my query is : When we have to pass Ordinary Resolution in this case. Can u also give me sample ordinary resolution to be passsed (in one of my company i am facing the same problem of inadequate profits) Many Thanks to you for detailed explanation.