Guidelines for Managerial Remuneration
01/03/2020‘Remuneration’ means any money or its equivalent given to any person for services rendered by him and includes the perquisites mentioned in the Income-tax Act, 1961.
Managerial remuneration in simple words is the remuneration paid to managerial personals. Here, managerial personals mean directors including managing director and whole-time director, and manager.
Permissible managerial remuneration payable under the Companies Act 2013
- Total managerial remuneration payable by a public company, to its directors, managing director and whole-time director and its manager in respect of any financial year:
|
Condition |
Max Remuneration in any financial year |
| Company with one Managing director/whole time director/manager | 5% of the net profits of the company |
| Company with more than one Managing director/whole time director/manager | 10% of the net profits of the company |
| Overall Limit on Managerial Remuneration | 11% of the net profits of the company |
| Remuneration payable to directors who are neither managing directors nor whole-time directors | |
For directors who are neither managing director or whole-time directors |
1% of the net profits of the company if there is a managing director/whole time director |
If there is a director who is neither a Managing director/whole time director |
3% of the net profits of the company if there is no managing director/whole time director |
The percentages displayed above shall be exclusive of any fees payable under section 197(5).
Until now, any managerial remuneration in excess of 11% required government approval. However, now a public company can pay its managerial personnel remuneration in excess of 11% without prior approval of the Central Government. A special resolution approved by the shareholders will be sufficient.
In case a company has defaulted in paying its dues or failed to pay its dues, permission from the lenders will be necessary.
- When the company has inadequate profits/no profits: In case a company has inadequate profits/no profits in any financial year, no amount shall be payable by way of remuneration except if these provisions are followed.
| Where the effective capital is: | Limits of yearly remuneration |
| Negative or less than 5 Crores | 60 Lakhs |
| 5 crores and above but less than 100 Crores | 84 Lakhs |
| 100 Crores and above but less than 250 Crores | 120 Lakhs |
| 250 Crores and above | 120 Lakhs plus 0.01% of the effective capital in excess of 250 Crores |