Meaning of 'no profit' or 'inadequate profit' If in any financial year, a company has suffered losses or the profit of the company computed in the manner laid down in sections 349 and 350, except that the remuneration of directors shall not be deducted from the gross profit, is less than the overall managerial remuneration payable under the provisions of section 198 read with the provisions of section 309 of the Act, shall be considered as 'no profit' or 'inadequate profit'.
It means that the remuneration payable to the managerial person is more than 5% of the net profit in case of one managerial person or more than 10% of the net profit in case of more than one managerial person.
If in any year the profits of the company seems inadequate to respect the contract of the managerial personnels in terms of limits as pescribed under section 198. The profits shall be considered as inadequate and part II of schedule XIII would apply.
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