Increase in remuneration of managing director

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Priyanka (Querist)
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05 June 2013 Is board resolution sufficient for increase in the salary of Managing director within limit specified in schedule Xiii ,if at the time of his appointment members conferred power to Board to increase his remuneration within the limit ?
All are requested to do a favor and suggest .ASAP

Ajay Mishra

Ajay Mishra (Expert)
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16 June 2013 Hi

In case of private limited company, Board resolution will be sufficient to increase remuneration of MD, but in case of public company general meeting resolution is also required as par Part III to Schedule XIII of the Companies Act, 1956.

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Priyanka

Priyanka (Querist)
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17 June 2013 Sir
I agree with you but if refer section 192 (4) (c) then the board res. for variation in the terms of appointment of MD is required to be registered .after referring section 311 ,schedule X111 part II and III along with section 192 what i have concluded is we can increase its remuneration with Board resolution :
---if it is within the limit
--- variation in his terms of appointement(that may be Increase in remuneration)
--- terms were approved in the shareholders meeting at the time of his appointment
then mere for yearly increase within the limit and within his time limit of appointment ,shareholders approval will not be required only board resolution will suffice subject to its registration through e- form 23 .

Please correct me if somewhere i am getting wrong

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Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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01 August 2024 Your understanding is generally correct, but let’s clarify and ensure you have all the information required for increasing the remuneration of a Managing Director (MD) in compliance with the Companies Act, 2013.

### **Key Points for Increasing MD’s Remuneration**

1. **Board Resolution vs. Shareholders' Approval:**
- **Within Limits Specified in Schedule XIII:**
- If the increase in remuneration of the Managing Director is within the limits prescribed in Schedule XIII of the Companies Act, 1956 (which has been replaced by Schedule V of the Companies Act, 2013), a board resolution may be sufficient, provided that the increase is within the terms approved by the shareholders at the time of the appointment.
- **Variation in Terms of Appointment:**
- Any change in the terms of appointment, including an increase in remuneration, needs to be within the powers conferred to the board by the shareholders at the time of the appointment.
- **Shareholders' Approval:**
- If the increase in remuneration is outside the limits prescribed or if the terms of appointment require it, then shareholders’ approval may be needed. This is generally required if the increase is beyond what was initially approved or if it involves substantial variation.

2. **Compliance with Section 192 and Schedule V:**
- **Section 192(4)(c):**
- According to Section 192(4)(c), any variation in the terms of appointment, including remuneration, needs to be registered with the Registrar of Companies (ROC). If the increase falls within the approved limits, a board resolution is sufficient, but the details must be filed in Form MGT-14 or the relevant form.
- **Schedule V (Companies Act, 2013):**
- Under Schedule V, the remuneration should be within the specified limits. If it exceeds the limits, you would need special resolutions and, in some cases, the approval of the Central Government.

3. **Form Filing:**
- **Form MGT-14:**
- For variations in terms of appointment or any changes approved by the board, you need to file Form MGT-14 with the ROC. This form must be filed within 30 days of passing the resolution.

4. **Board vs. Shareholders' Powers:**
- **Board Powers:**
- The board of directors can increase the remuneration within the limits prescribed, provided the shareholders had given the power to the board to make such increases when they approved the initial appointment.
- **Shareholders' Powers:**
- Any substantial changes or increases beyond the approved terms require shareholders' approval. This is often required for transparency and to protect the interests of the shareholders.

### **Summary**

1. **Board Resolution:** If the increase is within the limits set by Schedule V (formerly Schedule XIII) and is in line with the powers granted by shareholders at the time of the MD's appointment, then a board resolution is typically sufficient.

2. **Registration:** Regardless of whether the increase is within the approved limits or not, the resolution needs to be registered with the ROC using Form MGT-14.

3. **Shareholders' Approval:** If the increase is outside the prescribed limits or involves substantial changes, shareholders' approval may be required in addition to board approval.

It’s always good practice to review the latest provisions of the Companies Act, 2013 and consult with a legal or compliance expert to ensure full compliance with all statutory requirements.