Private Ltd.
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
22 June 2011
Is private Ltd. company pass any resolution in any meeting for increase in Director Remuneration.
22 June 2011
INCREASE OF REMUNERATION PAYABLE TO DIRECTOR
The Board discussed necessity of increasing remuneration payable to Mr.____________, Director of the Company. Mr. ______ has been appointed as Executive Director of the Company vide Board Meeting held on __________ (Date) with remuneration of Rs._______ /- per month and designated as “Head Operations” for all the practical purposes. Accordingly, it was
“Resolved that consent of Board of Directors be and is hereby accorded to increase remuneration payable to Mr. ________ from Rs.________ /- per month to the Rs.________ /-per month with effect from______ (Date). All other terms and conditions of the appointment are remaining same”.
The Board discussed necessity of increasing remuneration payable to Mr.____________, Director of the Company. Mr. ______ has been appointed as Executive Director of the Company vide Board Meeting held on __________ (Date) with remuneration of Rs._______ /- per month and designated as “Head Operations” for all the practical purposes. Accordingly, it was
“Resolved that consent of Board of Directors be and is hereby accorded to increase remuneration payable to Mr. ________ from Rs.________ /- per month to the Rs.________ /-per month with effect from______ (Date). All other terms and conditions of the appointment are remaining same”.
Querist : Anonymous
Querist :
Anonymous
(Querist)
22 June 2011
No, Saroja. I want to ask whether it is required by any section that Private Ltd. co. has to pass any resolution for increasing the Director Remuneration.
10 August 2024
Yes, in a Private Limited Company, increasing the remuneration of directors generally requires the passage of specific resolutions, and this process is governed by provisions in the Companies Act, 2013.
### Requirements for Increasing Director Remuneration:
1. **Board Resolution**:
- **Approval**: Any increase in director remuneration must be approved by the board of directors. This is typically done through a board resolution.
- **Documentation**: The resolution should clearly outline the new remuneration structure and reasons for the increase.
2. **Shareholders' Approval**:
- **Special Resolution**: If the increase in remuneration exceeds the limits prescribed under the Companies Act, 2013 or the Articles of Association (AoA) of the company, a special resolution is required. This resolution must be passed by the shareholders in a general meeting.
- **Form MGT-14**: File the special resolution with the Registrar of Companies (RoC) using Form MGT-14 within 30 days of passing the resolution.
3. **Compliance with the Companies Act, 2013**:
- **Section 197**: According to Section 197 of the Companies Act, 2013, the remuneration of directors must be within the limits specified under this section. For a private company, the overall managerial remuneration should not exceed 11% of the net profits of the company.
- **Schedule V**: If the remuneration exceeds the limits prescribed or if the company has no profits or inadequate profits, it must comply with Schedule V of the Companies Act, 2013, which outlines the criteria for remuneration in such cases.
4. **Remuneration of Managing Director or Whole-time Director**:
- **Approval Required**: For the Managing Director (MD) or Whole-time Director, remuneration above the limits set by the Companies Act requires both board and shareholder approval. This usually involves passing a special resolution in a general meeting.
5. **Directors' Contracts**:
- **Contractual Terms**: Any changes in the terms of the directors' contracts regarding remuneration should be documented and approved by the board and shareholders as needed.
### Summary of Steps:
1. **Board Meeting**: Call a board meeting and pass a resolution approving the increase in director remuneration.
2. **General Meeting**: If the increase exceeds statutory limits or requires special resolution, convene a general meeting and pass a special resolution.
3. **File with RoC**: File the special resolution with the RoC using Form MGT-14.
4. **Ensure Compliance**: Verify that the new remuneration is within the limits prescribed by the Companies Act, 2013, or comply with Schedule V if applicable.
### Key Points:
- Always check the company's AoA for any specific provisions regarding director remuneration.
- Ensure that all changes are documented and comply with both the Companies Act, 2013 and any relevant legal requirements.
Consulting with a company secretary or legal advisor is advisable to ensure all procedural and compliance aspects are correctly followed.
### Requirements for Increasing Director Remuneration:
1. **Board Resolution**:
- **Approval**: Any increase in director remuneration must be approved by the board of directors. This is typically done through a board resolution.
- **Documentation**: The resolution should clearly outline the new remuneration structure and reasons for the increase.
2. **Shareholders' Approval**:
- **Special Resolution**: If the increase in remuneration exceeds the limits prescribed under the Companies Act, 2013 or the Articles of Association (AoA) of the company, a special resolution is required. This resolution must be passed by the shareholders in a general meeting.
- **Form MGT-14**: File the special resolution with the Registrar of Companies (RoC) using Form MGT-14 within 30 days of passing the resolution.
3. **Compliance with the Companies Act, 2013**:
- **Section 197**: According to Section 197 of the Companies Act, 2013, the remuneration of directors must be within the limits specified under this section. For a private company, the overall managerial remuneration should not exceed 11% of the net profits of the company.
- **Schedule V**: If the remuneration exceeds the limits prescribed or if the company has no profits or inadequate profits, it must comply with Schedule V of the Companies Act, 2013, which outlines the criteria for remuneration in such cases.
4. **Remuneration of Managing Director or Whole-time Director**:
- **Approval Required**: For the Managing Director (MD) or Whole-time Director, remuneration above the limits set by the Companies Act requires both board and shareholder approval. This usually involves passing a special resolution in a general meeting.
5. **Directors' Contracts**:
- **Contractual Terms**: Any changes in the terms of the directors' contracts regarding remuneration should be documented and approved by the board and shareholders as needed.
### Summary of Steps:
1. **Board Meeting**: Call a board meeting and pass a resolution approving the increase in director remuneration.
2. **General Meeting**: If the increase exceeds statutory limits or requires special resolution, convene a general meeting and pass a special resolution.
3. **File with RoC**: File the special resolution with the RoC using Form MGT-14.
4. **Ensure Compliance**: Verify that the new remuneration is within the limits prescribed by the Companies Act, 2013, or comply with Schedule V if applicable.
### Key Points:
- Always check the company's AoA for any specific provisions regarding director remuneration.
- Ensure that all changes are documented and comply with both the Companies Act, 2013 and any relevant legal requirements.
Consulting with a company secretary or legal advisor is advisable to ensure all procedural and compliance aspects are correctly followed.
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