COMPANIES ACT, 2013
Appointment and Remuneration of
Managerial Personnel
CA. Arun Saxena
Saxena & Saxena
Chartered Accountants
811, Ansal Bhawan
16, Kasturba Gandhi Marg,
New Delhi – 110 001.
Mob.: 9810037364
E-mail : [email protected]
Appointment of Managing Director, Whole –
Time Director or Manager (Section 196)
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APPLICABILITY: Provisions of Section 196 are
applicable to all companies including Pvt. Co.s
A Company can appoint any of them
 MD
 Manager

BUT not both
Term of MD/ WTD/Manager- not exceeding 5
years at a time.
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Re-appointment can be made not later than one
year before expiry of term.
Age should be between 21years to 70 years.
If exceeding 70 yrs, justification should be given in
explanatory statement.
Appointment should be made in Board Meeting
subject to appointment of Shareholders in General
meeting.
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Appointment should be in accordance with provision
of Section 197 and Schedule V.
If, in variance to the conditions specified in the
schedule, CG approval required.
Notice for BM or GM shall specify all terms and
conditions of appointment and including interests of
directors in such appointment.
Return – 60 days (90 days in old Act)
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MANAGERIAL REMUNERATION
(SECTION 197,198)
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APPLICABILITY: Provisions of Section 197 are
applicable to public companies.
No restriction relating to managerial remuneration
for a private company.
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Overall Managerial Remuneration
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For all managerial Personnel(s) – 11% of net
profits.
In case remuneration exceeds 11% of net profits,
approval of CG required subject to provisions of
Schedule V.
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Managerial Remuneration with
approval in GM
i.
ii.
iii.
For one MD/WTD/Manager – 5% of net profit
Where more than one MD or WTD or Manager –
remuneration cannot exceed 10% of net profit.
Remuneration to Directors who are neither WTD
or MD:
If there is MD or WTD or Manager - 1% of net profit
ii. If there is no MD or WTD or Manager - 3% of net
profit
i.
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In case of No Profit or Inadequate Profit
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i.
i.
Compliance of Schedule V
In case of non compliance of Schedule V, CG
approval.
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Schedule V
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
In case company has no profits or inadequate profit, it
may, without CG approval, par remuneration not
exceeding higher of limits given below :
Where the effective Capital is
Limit of yearly remuneration shall
not exceed (Rs.)
(i) Negative or less than Rs. 5 Cr
30 Lacs
(ii) 5 Cr & above but less than 100 Cr
42 Lacs
(iii) 1000 Cr & above but less than 250 60 Lacs
Cr
(iv) 250 Cr& above
60 Lacs +0.01 % of the effective
capital in excess of Rs. 250 Cr
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NOTES:
1.
2.
3.
Above limits shall be doubled, if SR passed.
Above limits shall be pro rated if remuneration is
paid for part of year.
If Managerial Personnel
i.
Is not security holder of Rs. 5 Lacs or more; or
ii. Not related to directors or promoters within 2
years prior to his appointment
Remuneration can be paid 2.5% of current relevant
profits.
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CONDITIONS
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(i)
(ii)
(iii)
(iv)
payment of remuneration is approved by a Board resolution;
Approval by the Nomination and Remuneration Committee; (If
any)
the company has not made any default in repayment of any of
its debts for a continuous period of 30 days in the preceding
financial year before the date of appointment of such
managerial person;
A SR has been passed at GM for payment of remuneration for
a period not exceeding 3 years;
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v. A statement along with a notice calling the GM given to the
shareholders containing the following information, namely:—
I. General Information: Nature of industry, date of commencement
of production, finacial performance etc.
II. Information about the appointee: Background details, Past
remuneration, recognition, awards, job profile, remuneration
proposed etc.
III.Other information: Reason for loss or inadequate profit,
expected increase in productivity and profit in measurable
terms, etc.
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Provisions of Section 197
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The remuneration shall be exclusive of sitting fees.
{Section 197(2)}
Net profit for this section shall be computed as per
method given in Section 198. {Section 197(8)}
The remuneration payable shall be determined
either by articles or by OR or by SR where its
articles required for SR.
SAXENA & SAXENA
THANK YOU
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