Effective capital of the Company

Board approval & (ORDINARY) reso at next GM [S. 196(4)]

Board approval & SPECIAL reso
[Proviso to Sch. V, Part II, Section II, (A)]

(A)

(B)

From

To

* Yearly remuneration not exceeding

Negative

< ₹ 5 cr

₹ 60 lakhs

* Yearly remuneration exceeding the limits mentioned in the earlier column (A)

₹ 5 cr

< ₹ 100 cr

₹ 84 lakhs

₹ 100 cr

< ₹ 250 cr

₹ 120 lakhs

₹ 250 cr and above

₹ 120 lakhs + 0.01% of effective capital in excess of ₹ 250 cr

1.

[Explanation I]

Effective capital =

• paid-up share capital (excluding share application money or advances against shares) +
• amount, if any, for the time being standing to the credit of share premium account +
• reserves and surplus (excluding revaluation reserve) +
• long-term loans and deposits repayable after one year (excluding working capital loans, over drafts, interest due on loans unless funded, bank guarantee, etc., and other short-term arrangements)]

reduced by: the aggregate of -

• any investments (except in case of investment by an investment company whose principal business is acquisition of shares, stock, debentures or other securities) +
• accumulated losses +
• preliminary expenses not written off

2.

[Explanation II]

3.

[Explanation IV]

For the purposes of this Schedule, “negative effective capital” means the effective capital which is calculated in accordance with the provisions contained in Explanation I of this Part is < 0

1.

Remuneration
[Explanation VI. (B)]

“Remuneration” means remuneration as defined in S. 2(78) and includes reimbursement of any direct taxes to the managerial person

2.

Remuneration
[S. 2(78)]

“remuneration” means any money or its equivalent given or passed to any person for services rendered by him and includes perquisites as defined under the Income-tax Act 1961

3.

Excluded Perquisites
[Section IV of Part II, Sch. V]

Perquisites NOT INCLUDED in managerial remuneration:

1. contribution to provident fund, superannuation fund or annuity fund to the extent these either singly or put together are not taxable under the Income-tax Act 1961;
2. gratuity payable @ not > ½ month’s salary for each completed year of service; and
3. encashment of leave at the end of the tenure
4. an expatriate managerial person (including a non-resident Indian) shall be eligible to the following perquisites which shall not be included in the computation of the ceiling on remuneration specified in Section II or Section III—
   1. Children’s education allowance: In case of children studying in or outside India, an allowance limited to ₹ 12,000 per month per child or actual expenses incurred, whichever is less, up to a maximum of 2 children
   2. Holiday passage for children studying outside India or family staying abroad: Return holiday passage once in a year by economy class/once in 2 years by first class to children and to the members of the family from the place of their study or stay abroad to India if they are not residing in India, with the managerial person
   3. Leave travel concession: Return passage for self and family in accordance with the rules specified by the company where it is proposed that the leave be spent in home country instead of anywhere in India

Explanation III.— For the purposes of this Schedule, ‘‘family’’ means the spouse, dependent children and dependent parents of the managerial person.

4.

Remuneration for other services
[S. 197(4)]

either by the AoA of the Co, or by a resolution or, if the AoA so require, by a Spl Reso, passed by the Co in GM and the remuneration payable to a director determined aforesaid shall be inclusive of the remuneration payable to him for the services rendered by him in any other capacity, unless

• the services rendered are of a professional nature; and
• in the opinion of the NRC (if the Co is covered u/s 178) or the BoD (in other cases), the director possesses the requisite qualification for the practice of the profession.

5.

Sitting fees
[S. 197(2), (5) &
R.4 of the Co (MR) Rules, 2014]

• Sitting fees to be excluded while calculating remuneration as a % of net profit as shown in the chart above
• Sitting fees NOT > ₹ 1 lakh per meeting of the Board or committee thereof
• For Independent Directors and Women Directors, the sitting fee shall not be < the sitting fee payable to other directors

6.

Manner of payment of remuneration
[S. 197(6)]

A director or manager may be paid remuneration either by way of a monthly payment or at a specified percentage of the net profits of the Co or partly by one way and partly by the other

7.

Remuneration payable to a managerial person in two companies: [Section V]

Subject to the provisions of sections I to IV, a managerial person shall draw remuneration from one or both companies, provided that the total remuneration drawn from the Cos does not exceed the higher maximum limit admissible from any one of the Cos of which he is a managerial person

1.

Approval for remuneration (i)

Payment of remuneration is approved by a resolution passed by the BoD and, in the case of a Co covered u/s 178(1) also by the NRC;

Explanation IV.— The NRC while approving the remuneration under Section II or Section III, shall—

1. take into account, financial position of the Co, trend in the industry, appointee’s qualification, experience, past performance, past remuneration, etc.;
2. be in a position to bring about objectivity in determining the remuneration package while striking a balance between the interest of the Co and the SH

2.

No Default (ii)

• the Co has not made any default in repayment of any of its debts (including public deposits) or debentures or interest payable thereon for a continuous period of 30 days in the preceding FY before the date of appointment of such managerial person; and
• in case of a default, the date of obtaining prior approval by the Co from secured creditors for the proposed remuneration and
• the fact of such prior approval of secured creditor having been obtained is mentioned in the explanatory statement to the notice convening the GM

3.

GM Approval (iii)

• an ordinary or a Spl Reso, as the case may be, has been passed for payment of remuneration, at the GM of the Co
• for a period not exceeding 3 years