Urgent query:
Fact: Mr. X is appointed as Managing Director of an unlisted public limited company for a period of 3 years with a proposed remuneration of Rs. 5 lacs p.m.. The company is having a paid up capital of Rs. 15,00,000 divided into 15,00,000 equity shares of Re 1 each. Out of this proposed Rs. 5 lacs p.m., currently the company would be paying Rs. 75000 p.m. as permitted in Schedule XIII of the Companies Act, 1956 and the full payment of Rs. 5 lacs p.m. to be made if Central Government grants approval. The Company is a newly formed one with no income generated. The draft general meeting resolution is as under.
Please let me know whether the draft general meeting resolution (attached) is OK as per law or any modification is required or else whether the pre Central govt approval partial payment can be made even though well within the limits as per schedule XIII. Also please let me know whether filing of form 23 can be done and file Central Govt. application without waiting for ROC approval.
Thanking
DRAFT
Shareholders Resolution
“RESOLVED that subject to approval of the Central Government and provisions of Sections 198, 269, 309 read with Schedule XIII and all other applicable provisions, if any, of the Companies Act, 1956, and any other approvals as may be necessary, consent be and is hereby accorded for appointment of Mr. X, Director of the Company, as Managing Director for a period of three years w.e.f. __January, 2010 to __th , 2013 which period may be renewed further as may be decided by the Board of Directors, at a remuneration of Rs. 5 lacs p.m. but out of this Rs. 5 lacs, the current remuneration to be paid to Mr. X as Rs. 75000 p.m. as per Schedule XIII of the Companies Act, 1956 and the over and above amount of Rs 75000 p.m. to be paid as may be granted/ approved or modified by the Central Government.
RESOLVED FURTHER THAT such remuneration should be in accordance with the limit prescribed in Schedule XIII of the Companies Act, 1956 or any amendment thereto and, if necessary, as may be agreed to between the Central Government and the Board of Directors as may be acceptable to Mr. X .
“RESOLVED FURTHER THAT, in the event of any statutory amendment, modification or relaxation by the Central Government to Schedule XIII to the Companies Act, 1956, the Board of Directors of the Company or if deemed necessary by the Board of Directors (hereinafter referred to as ‘the Board’) be and is hereby authorised to vary and / or increase the remuneration including salary, commission, perquisites, allowances, etc., within such prescribed limit(s) or ceiling, be suitably amended to give effect to such modification, relaxation or variation without any further reference to the members of the Company in General Meeting.”
RESOLVED FURTHER THAT any Director of the Company be and is hereby authorized to file necessary prescribed eForm with the Ministry of Corporate Affairs/ Registrar of Companies, Mumbai, and do all such acts, deeds and things as may be necessary in order to give effect to the above resolution.”
Explanatory Statement u/s 173(2) of the Companies Act, 1956
The Board of Directors of the Company has subject to the approval of the Central Government and shareholders of the Company appointed Mr. X, Director of the Company as Managing Director w.e.f ________, for a period of 3 years from __________to ________.
The main terms and conditions of Mr. X's appointment shall be as under:
1. Mr. X to perform such duties and exercise such powers as are entrusted to him by the Board .
2. REMUNERATION:
The remuneration payable shall be determined by the Board from time to time within, however, the maximum limits of Rs.5,00,000 p.m.but out of this Rs. 5 lacs, the current remuneration to be paid to Mr. X as Rs. 75000 p.m. as per Schedule XIII of the Companies Act, 1956 and the over and above amount of Rs 75000 p.m. to be paid as may be granted/ approved or modified by the Central Government.
Company’s contribution to provident fund, gratuity payment as per Company’s rules and encashment of leave at the end of his tenure shall not be included in the computation of ceiling of remuneration and perquisites as aforesaid.
In the event of absence or inadequacy of profits in any financial year, the remuneration payable to him by way of salary and perquisites shall not exceed the maximum limit prescribed under Schedule XIII to the Companies Act, 1956.
The Board shall have the discretion and authority to modify the forgoing terms and remuneration within, however, the limit prescribed under Schedule XIII to the Companies Act, 1956.
The appointment will be for a period of 3 years, which may be terminated by either party giving to the other _________notice in writing or upon Mr. X ceasing to be Director of the Company.
In compliance with the provisions of section 309 and other applicable provisions, if any, of the Companies Act, 1956, the remuneration payable to Mr. X is placed before the members, in general meeting for their approval by way of special resolution.
The terms and conditions of Mr. X ’s appointment as set out above may also be treated as an abstract of the terms and conditions between Mr. X and the Company under Section 302 of the Companies Act, 1956.
Your directors recommend the approval of the proposed resolution by the Members.
None of the Directors of the Company except Mr. X is concerned or interested in the resolution at Item no. 1 of the Notice.
The draft terms and conditions of remuneration of Mr. X is available for inspection by any member of the Company at the Registered Office of the Company between 11:00 a.m. and 1:00 p.m. on any working day prior to the date of the Meeting and at the Venue of the Extra Ordinary General Meeting on the date of the Meeting during the meeting hours.
Place: Mumbai
Date : _______2010. By Order of the Board of Directors
Director
CAclubindia
