MCA notifies Rules to empower shareholders in deciding salary of managerial staff
Published: Sep 14, 2018
By TIOLCORPLAWS News Service
NEW DELHI, SEPT 14, 2018: THE MCA yesterday notified commencement of important amendments to the Companies Act along with the rules, so as to provide that with effect from September 12, 2018 approval of the Central Government shall no longer be required for the payment of remuneration to managerial personnel (in excess of 11 per cent of the net profit of a company).
In a move designed to empower common shareholders of a company, the government has notified that remuneration in excess of individual limits laid down for Executive and non-Executive Directors shall henceforth be approved by shareholders through a Special Resolution. Care has, however, also been taken and it has been stipulated that where a company has defaulted in payment of dues to any bank/financial institution or non-convertible debenture holder or any other secured creditor, their prior approval shall 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 have 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 Government 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 hitherto being filed by Companies for both appointment and remuneration of managerial personnel, would henceforth 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.