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Managerial Remuneration

Keval Shah (C.A.) (52 Points)

30 April 2010

Can someone throw light on Limit on Managerial Remuneration of a Pvt Ltd Co as well as Public Ltd Co.

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9 Replies

CA Dhiraj Ramchandani (CA, M. com) (10823 Points)
Replied 30 April 2010

Maximum Limit

Section 198 of the companies act, 1956 puts a maximum limit of 11% of the net profits in any financial year on the managerial remuneration payable by a public company or a private company which is a subsidiary of a public company to it’s directors including any managing or whole time director or manager.

Minimum Limit

Section 198 (4) of the companies act 1956 as amended by the companies act 1988 provided that subject to the provisions of section 269 read with schedule XIII, if in any financial year a company has no profits or its profits are inadequate, the company shall not pay to its directors including any managing or whole time director or manager, by way of remuneration any sum except with the previous approval of the central government.

Calculation of Managerial Remuneration

The remuneration should as far as possible be broken up under the following broad heads as per the requirements of Schedule VI:-

a) Salaries and allowances

b) Monetary value of various perquisites

c) Contribution to provident, superannuation and gratuity funds

d) Commission

The following perquisites or benefits provided by the company to its managerial remuneration:

· Any expenditure incurred by the company in providing rent free accommodation, or any other benefit or annuity.

· Other benefit or concessional benefit

· Any expenditure in respect of any obligation paid.

· Any expenditure incurred by company in effecting any insurance on the life of the managerial.

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CA Dhiraj Ramchandani (CA, M. com) (10823 Points)
Replied 30 April 2010

Remuneration to Manager

Section 387 of the companies’ act 1956 contains the provisions relating to the remuneration payable to the manager of a public company or its subsidiary which are as follows:

· A Manager may receive remuneration by way of a monthly payment or by way of a specific percentage of the net profits of the company or partly by way of monthly payment and partly by way of specific percentage of the net profits of the company.

· The total remuneration can not exceed 5% of the net profits of the company except with the previous approval of the government.

· The net profits of the company are to be calculated in the manner laid down in section 349 and 350 of the companies act.

A company can not have more than one manager at a time.

CA Dhiraj Ramchandani (CA, M. com) (10823 Points)
Replied 30 April 2010

Remuneration to the Directors

Section 309 contain the provisions relating to remuneration payable to the directors including any MD or WHD of a public company and a private company which is the subsidiary of a public company which are as follows:

· A director may be paid fee for attending the meetings of the board or a committee thereof attended by him.

· A WHD or a MD may be paid remuneration either by way of a monthly payment or at a specified percentage of the net profits or partly by one way and pertly by other. But except with the previous approval of the central government the remuneration shall not exceed:

Ø If one whole time director : 5%

Ø If More than one whole time director : 10%

Ø If only part time directors : 3%

Ø If part time directors as well

as whole time directors : 1%

However the company can increase the remuneration with the previous approval of the central government and by passing a special resolution.

· The net profit for this purpose shall be calculated in the manner laid down in section 349 and 350.

· A director who is in receipt of any commission from the company is not entitle to receive any commission or remuneration.

CA Dhiraj Ramchandani (CA, M. com) (10823 Points)
Replied 30 April 2010

Mind it, this allz for PUBLIC COMPANY & PRIVATE COMPANY, Which Is SUBSIDIARY OF PUBLIC COMPANY

Overall Remuneration Limit

The following chart shows the maximum limit of remuneration:

If there is only one managing director	11%
If more than one managing director	5%
If there is only one MD	10%
If there is only part time directors only and has no MD	3%
If there is pert time directors and also have one or more MD	1%
If there is manager	5%