Maximum Remuneration to Managerial Personnel
A public company can pay managerial remuneration to its directors, including managing director, whole-time director, and its manager in respect of any financial year, up to the maximum limit as prescribed under section 197. The remuneration computed as per section 198 shall not exceed 11% of the net profits for the financial year, except that the remuneration of the directors shall not be deducted from the gross profits. (Read also: Fund Management: 10 common Misconceptions)
Provided that the company in general meeting may, authorize the payment of remuneration exceeding 11% of the net profits of the company, subject to the provisions of Schedule V:
| Anyone MD or WTD or manager | shall notexceed 5% of the net profits of the company |
| more than one MD or WTD or manager remuneration | shall notexceed 10% of the net profits to all such directors and managers taken together; |
| directors who are neither MD nor WTD | shall not exceed 1% of the net profits of the company, if there is a managing or whole-time director or manager |
| directors who are neither MD nor WTD | shall not exceed 3% of the net profits of the company, if there is no managing or whole-time director or manager |
PART II of Schedule V
- Remuneration payable by companies having profits: Subject to the provisions of section 197, a company having profits in a financial year may pay remuneration to a managerial person or persons not exceeding thelimits specified in such section.
- Remuneration payable by companies having no profit or inadequate profit without Central Government approval: Where in any financial year during the currency of tenure of a managerial person, a company has no profits or its profits are inadequate, it may pay remuneration to the managerial person not exceeding, the limits under (A) and (B) given below:-
| Where the effective capital is | Limit of yearly remunerationpayable shall not exceed (Rupees) |
| 1. Negative or less than 5 crores |
60 lakhs |
| 2. 5 crores and above but less than 100 crores |
84 lakhs |
| 3. 100 crores and above but less than 250 crores |
120 lakhs |
| 4. 250 crores and above | 120 lakhs plus 0.01% of the effective capital over Rs. 250 crores |
Provided that the remuneration overthe above limits, may be paid, if the resolution passed by the shareholders, is special.
(B) In the case of a managerial person who is functioning in a professional capacity, if such managerial person is not having any interest in the capital of the company or its holding company or any of its subsidiaries directly or indirectly or through any other statutory structures and not having any, direct or indirect interest or related to the directors or promoters of the company or its holding company or any of its subsidiaries at any time during the last two years before or on or after the date of appointment and possesses graduate-level qualification with expertise and specialized knowledge in the field in which the company operates:
Provided that any employee of a company holding shares of the company not exceeding 0.5% of its paid-up share capital under any scheme formulated for allotment of shares to such employees including Employees Stock Option Plan or by way of qualification shall be deemed to be a person not having any interest in the capital of the company.
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