Managerial Remuneration
Section 197 of the Companies Act, 2013 prescribed the maximum ceiling for payment of managerial remuneration by a public company to its managing director, whole-time director and manager which shall not exceed 11% of the net profit of the company in that financial year. [Profit Computed in accordance with section 198]
The payment beyond the said limit of 11% can be made by passing an Ordinary Resolution in the General Meeting of the Company.
Points to Note:
- Remuneration payable to any one MD/WTD/Manager shall not exceed 5% of Net profit.
- If there is more than one MD/WTD/Manager, remuneration shall not exceed 10% of Net profit.
- Remuneration payable to directors who are not MD and WTD shall not exceed.
- 1% of net profit, if there is MD/WTD/Manager.
- 3% of net profit in any other case.
For payment of remuneration exceeding the threshold limits of 5% & 10% to MD/WTD/Manager and 1% & 3% to other directors, the approval of shareholders through a Special Resolution shall be required.
The companies who have defaulted in payment of dues to any Bank/PFl/Non-Convertible Debenture holder or any other secured creditor, prior approval shall be taken from them before obtaining the approval in the general meeting for payment in excess of the threshold limits.
If the director receives remuneration in excess of the threshold limit without obtaining approval required in this section, he shall refund such sum to the Co. and shall hold it in trust of the Company, until refunded.
