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managerial remuneration

16 March 2010

hello friends

ours is a public limited company. my question is which year's profit are to be taken as base profit for calculation of managerial remuneration limit. if we have to decide whether we had paid appropriate remuneration or not to m.d. from april 09 to march 010 then whether we will take march 09 profits or march 010 profits for calculation. kindly advise

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5 Replies

Ankur Garg (Company Secretary and Compliance Officer) (114773 Points)
Replied 16 March 2010

March 2009 profits should be taken into account.

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priyanka manawat (service) (138 Points)
Replied 16 March 2010

and if i have to re-appoint m.d in the month of may 010 with new remuneration then whether i have to take march 010 results or march 09. and also whether schedule XII limit like rs 200000 per month is applicable for remuneration of each managerial personnel or all of them. plz advise

Jagruti (CS) (Service) (1953 Points)
Replied 16 March 2010

For base you have to consider Mar ' 09 profits but actual percentage of remuneration will be calculated on basis of Mar'10 profits, as per Section 198.

Limit stated in Schedule XIII in part II Section II is per Managerial person which is applicable only if profits of Company is inadepquate or no profit.

Means if Company decides to pay MD 50 lacs during 2009-10 but profit for that year is 30 lac than Section II will be applicable due to inadequate profits

Ankur Garg (Company Secretary and Compliance Officer) (114773 Points)
Replied 16 March 2010

Agree with the learned member.

REMUNERATION PAYABLE TO MANAGERIAL PERSONNEL BY COMPANY HAVING NO PROFITS OR INADEQUATE PROFITS

Section II of Part II of Schedule XIII to the Companies Act, 1956 relates to remuneration payable to managerial person i.e., a managing or whole-time director or a manager by companies having no profits or inadequate profits.

Following are the worth noting points in regard to payment of remuneration by companies having no profits or inadequate profits for appointment of a managerial person under the provisions of Schedule XIII to the Companies Act, 1956.

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.