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Managerial remuneration by unlisted public in case of profir

Mishu (CA) (95 Points)

18 August 2011

Hi everyone,

i have a query

Our company is a public unlisted company, we want to pay remuneration to our MD and WTDs.

Company has earned profit of 20 cr. in this year

proposed remuneration is MD 3L, WTD1 Rs. 41500, WTD2 Rs. 77500, WTD3 Rs. 56000

according to section 309 it is 5% for one director and 10% for all the directors of the net profit nad also falls under section1 of Part II of Schedule XIII.

My query is can be approve this remuneration in board meeting or do we have to take shareholders approval for that?

Thanks in advance

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13 Replies

AMIT MISHRA (Legal Professional) (393 Points)
Replied 18 August 2011

Hi Isha,

Can you please let me know the effective capital of the company??.The remuneration to be distributed shall depend upon the same and is remuneration payable per month??

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Mishu (CA) (95 Points)
Replied 18 August 2011

effective capital would be somewhere near to 40 crore accrding to formula in Schedule XIII..Yes remuneration would be paid monthly

AMIT MISHRA (Legal Professional) (393 Points)
Replied 18 August 2011

Hi Isha,

In your case if the remuneration payable is a monthly remuneration then a special resolution at the general meeting of the Company is required in this behalf.

Thanks & Regards

Amit Mishra

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Mishu (CA) (95 Points)
Replied 18 August 2011

But Amit.. where is it written that we need to take shareholders approval

AMIT MISHRA (Legal Professional) (393 Points)
Replied 18 August 2011

Dear Isha,

Refer to the SCHEDULE XIII PART II (B) (a table with regard to the same is given (and look below that the conditions mentioned. Company Law by A Ramaiya)

Thanks & Regards

Amit Mishra

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Mishu (CA) (95 Points)
Replied 18 August 2011

But since our company is a profit making company Section I of Part II would apply

AMIT MISHRA (Legal Professional) (393 Points)
Replied 18 August 2011

Hi Isha,

section I applies where company has adequate profits and what criteria of adequacy have you taken?

Section II applies where the Company incurs loss or has inadequate profits.......here the profits would be considered inadequate with regard to manegerial remuneration.Else we can wait for other opinions on the same

Thanks & Regards

Amit Mishra

1 Like

Mishu (CA) (95 Points)
Replied 18 August 2011

company has a net profit of around 17 crores, so don't u think its adequate enough to fall under section I of Part II

Mishu (CA) (95 Points)
Replied 20 August 2011

Hi everyone,

one more thing do we have to file Form 25 C for increase in remuneration.

Rushi (Practice) (160 Points)
Replied 20 August 2011

as such you can pay the remuneration by passing resolution in boad meeting and as such there is no requirement for the approval of share holders. yas you have to file form 25 c for incremental remuneration

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Mishu (CA) (95 Points)
Replied 20 August 2011

Our company's article says

" Subject to the provision s of section198, 309, 310 and 311 of the act and schedule XIII of the act, a MD shall, in addition to the remuneration payable to him as a director of the company under the articles, receive such additional remuneration as may, from time to time, be sanctioned by the company."

Does it mean that for increasing the director's remuneration in middle of his tenure, do we have to take shareholders approval

sudarshan (CA) (745 Points)
Replied 24 September 2011

Appointment and remuneration of public company should be by way of shareholders approval and filing of form 25c with Roc. If remuneration is payable is within limits laid down by sec 309, no need to look into sch XIII which talks about remuneration in the absence or inadequacy of profit.

sudarshan (CA) (745 Points)
Replied 24 September 2011

Rushi(practice) kindly look into section 269 of cos act. It mandates appointment of managerial personnel only in GM by SH approval and filing of form with Roc.