Remuneration committee

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S.M.Gulati

S.M.Gulati (Querist)
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05 February 2011 whether it is necessary to form remuneration committee in case of closely held companies aslo in case of payment of remuneration when no profit or inadequate profit?

ADITI BIDASARIA

ADITI BIDASARIA (Expert)
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05 February 2011 Schedule XIII of the Companies Act, 1956 as amended by Notification No. GSR 36(E), dated 16th January, 2002 provides that payment of remuneration of a managerial person shall be approved by a resolution passed by the Remuneration Committee. Therefore, it shall be compulsory for a public company or a private company, which is a subsidiary of a public company to constitute and appoint a remuneration committee of the directors.
Explanation IV of Schedule XIII, inserted by Notification No. GSR 36(E), dated 16th January, 2002 provides that for the purposes of this section, 'Remuneration Committee' means that a committee which consists of at least three non-executive independent directors including nominee director or nominee directors, if any.

Further, to proceed for Schedule XIII, it is mandatory to constitute remuneration Committee.