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Section 198 & Section 309

The Dude (Specialist- Finance) (303 Points)

24 April 2011

Sir,

Section 198 says the maximum remuneration that is payable to a director should not exceed 11% of the Net Profits of the Company

Section 309 says if the max remuneration exceeds 10% of the net profits then CG approval is required

So does it mean that if it is 11%, then CG approval is required????

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Jayashree S Iyer (Company Secretary) (3224 Points)
Replied 25 April 2011

Section 198 specifies the overall limit on managerial remuneration (includes payment to MD/WTD/Manager and part time directors) which is 11% of the nets profits.

However the limit specified in Section 309 is in respect of payment to WTD/MD which is 10%. The 10% limit does not include payment to non-executive directors. It separately provides for payment of remuneration to directors who are neither in the whole time employment of the company nor a MD. The limit of remuneration for non-executive directors is 1% of net profits where the company has MD/WTD and 3% where the company does not have MD/WTD.

CG approval would be required in the following cases -

i) any payment exceeding 10% to MD/WTD

2) any payment exceeding 1% or 3% (as the case may be) in case of non-executive directors

3) appointment of MD / WTD not in accordance with Schedule XIII

4) in case of non-profit making companies payment of remuneration in excess of the limits specified in Schedule XIII in case of listed companies.

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