Managerial remuneration

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P.C. Joshi (Querist)
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30 November 2011 A ltd. co. which was incorporated on 20th June 2011 as a group holding co. has a paid up capital of Rs 4lacs wants to pay Rs 8 lacs remuneration per month to its directors. is there any restriction.

In view of amended provisions of schedule xiii. the company can pay remuneration to its directors under schedule xiii by passing a special resolution the erthswhile requirement of approval from CG has been done away with in respect of unlisted companies. However the resilution of remuenration commeitte of directors is must. AM I right.

Can the low capital may pose any difficulty as the effective capital is too low.

can anyone pls guide

Regards

P.C> Joshi

RG - A Helping Hand

RG - A Helping Hand (Expert)
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30 November 2011 Joshi sir plz mention the status of company.

As u hv mentioned A ltd with paid up capital of Rs. 4 lacs creating certain confusion.

P.C. Joshi

P.C. Joshi (Querist)
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30 November 2011 I am extremely sorry. It's a public co. with paid up capital of Rs 5lacs.

Thanks

P.C. Joshi

RG - A Helping Hand

RG - A Helping Hand (Expert)
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01 December 2011 You are right CG approval in unlisted public is not required. I am presuming in your case there is inadequacy of profit hence Section II of part II is applicable. Now everything is dependent on the proposed remuneration.

Resolution by remuneration committee is must in your case. Further role of effective capital is imp. Please read the points below:

1. Decide the table of remuneration based on proposed remuneration
2. Decide your effective capital
3. Select the right remuneration.
4. Fulfill the conditions given below the table of remuneration given in Sch XIII.

RG

P.C. Joshi

P.C. Joshi (Querist)
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01 December 2011 Dear Richank,

thanks for shaing your views. I want clarity on following issues.

As you notice the company is incorporated a few months back and it has a paid up capital of Rs. 5 lacs practcally the effective capital is also Rs 5 lacs. the proposed remuneration is Rs. 6 lacs p.m.

As per latest amendment in sch. XIII, in case of a company not having sufficient ptofit or inadequate of profit, the remuneration exceeding the limits of sch.XIII may be paid if it is recommended by the remuneration committee and approved by the shareholders by a special resolution(CG approval not required). as per my understanding:

1. if the remuneration committee recomends and shareholders approval taken by a special resolution, then any remuneration may be paid.SO the above remuneration can be paid irrespective of the inadequacy of ptofit and effective capital.

2. How many members should be in the remuenration committee of an unlisted co.

3. can the directors whose remuneration is proposed to be paid can be members of the remuneration committee.

Pls let me know your views.

thanks
P.C. joshi

RG - A Helping Hand

RG - A Helping Hand (Expert)
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01 December 2011 Yes the above remuneration can be paid by following the conditions of Sch XIII.

Composition of RC is not mentioned in Sch XIII for an unlisted company like it is mentioned for a listed company. So I would advise you follow the one mentioned for a listed company bcoz earlier the same was used.

Yes the director in question can be a member of RC but being interested he should not participate in RC meeting keeping in view good governance practice.

RG

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