Govt scraps need for approval regarding remuneration to managerial personnel beyond individual limits
Published: Sep 13, 2018
By TIOLCORPLAWS News Service
NEW DELHI, SEPT 13, 2018: The Ministry of Corporate Affairs (MCA), in pursuance of its policy of Minimum Government-Maximum Governance and providing Ease of Doing Business to the law-abiding corporates of this country, has notified commencement of important amendments to the Companies Act along with the rules thereof, so as to provide that with effect from September 12, 2018 approval of the Central Govt should no longer be required for the payment of remuneration to managerial personnel (in excess of 11 % of the net profit of a company).
In a move designed to empower common shareholders of a company, the govt had notified that remuneration in excess of individual limits laid down for Executive and non-Executive Directors should henceforth be approved by shareholders through a Special Resolution. Care has, however, also been taken and it had been stipulated that where a company has defaulted in payment of dues to any bank or financial institution or non-convertible debenture holder or any other secured creditor, their prior approval should be required before placing the matter for consideration and approval in the General Meeting of the shareholders.
Relevant changes, as necessary, to the Schedule-V of the Companies Act had also been simultaneously notified, whereby in case of loss or inadequacy of profits, remuneration can be paid only in accordance with the provisions of Schedule-V and no approval of the Central Govt would be required for the same on a case to case basis.
With the issue of the notification all pending applications submitted to the Ministry for approval of proposals for payment of managerial remuneration in excess of the limits laid down, would automatically abate and companies are free to obtain requisite approvals for those proposals, from the shareholders within one year.
MR-2 e-Form, which was being filed by Companies for both appointment and remuneration of managerial personnel, would have to be filed only for appointment of managerial personnel as per the revised Schedule-V.
With the issue of this notification, five Amendments brought forth to the Companies Act 2013, in the Companies (Amendment) Act, 2017, covering amendments to Sections 196, 197, 198, 200 and 201 of the Companies Act, 2013, stand effected.
