MANAGERIAL REMUNERATION

SECTION:- 2(78)

Remuneration means any money or its equivalent given or passed to any person for rendering services by him and includes perquisites as defined under income tax act,1961

Sections Involved

•Section 197 of the companies act 2013

•Section 198 of the companies act 2013

•Schedule V

Section 197 of the Companies Act 2013

This section talks about overall maximum remuneration and managerial remuneration in case of absence or inadequacy of Profits

(1)The total Remuneration payable by Public company shall not exceed 11% of Net Profit.

Provided that in G.M. with the approval of central government may pay exceeding the above limit subject to the condition specified in schedule V.

Provided Further that except with the approval of company in general meeting-

In case of Executive Director:-

•Only 1 Managing Director:- shall not exceed 5%

•More than 1 Managing Director:- shall not exceed 10%

In case of Non-Executive Director:-

1 M.D or W.T.D:- 1% of the net profits of the company.

In any other case:- 3% of the net profits of company

In case of No Profits or Inadequacy of profits

(3) Notwithstanding to section (1) and (2), but subject to the provision of Schedule V

The company shall not pay to its directors any amount of Remuneration.

A company having no profits or inadequate profits in any financial year may still pay remuneration to managerial personnel without the approval of Central Government subject to higher limits as prescribed in schedule V. 

WHERE THE EFFECTIVE CAPITAL IS

•Negative or less than 5 crores
•5 crores or more but less than 250 crores
•100 crores or more but less than 250 crores
•250 crores and above


•MAXIMUM YEARLY REMUNERATION LIMITS(IN RUPEE) 

•Negative or less than 5 crores
•5 crores or more but less than 250 crores
•100 crpores or more but less than 250 crores
•250 crores and above
Provided that the above limits shall  be doubled if  the  resolution passed by the shareholders is a special  resolution.

The limits shall be doubled if the special resolution is passed.

In case of the condition specified in section is not complied, The Central Government approval is needed.