What is the meaning of inadequate profits for managerial remuneration?

What is the meaning of inadequate profits for managerial remuneration?

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.

Is profit calculated for managerial remuneration?

Calculation of Net profit The Act says the remuneration payable to managing director or wholetime director or manager or any other director shall be up to the prescriber percentage on the net profit of the company. Section 198 of the Companies Act 2013 provides calculation of net profit of the company.

How managerial remuneration is determined?

Section 309 provides that remuneration payable to directors shall be determined either by the articles of the company or by a resolution of the company in general meeting. The resolution may be ordinary or special, as the articles may require.

What is Section 197 of Companies Act?

Section 197 of the Companies Act, 2013 prescribed the maximum ceiling for payment of managerial remuneration by a public company to its managing director whole-time director and manager which shall not exceed 11% of the net profit of the company in that financial year computed in accordance with section 198 except that …

What is the maximum limit of managerial remuneration?

11%
(1) Maximum amount of managerial remuneration in respect of any financial year shall not exceed 11% of the net profits of that company for that financial year computed in the manner laid down in section 198 except that the remuneration of the directors shall not be deducted from the gross profits.

Is there any limit for directors remuneration?

In case of Public company, a company can pay not more than 11% of the net profit as calculated in a manner laid down in section 198 of the companies act. A company has more than one such directors, remuneration shall be payable not more than 11% of the net profit.

What is the difference between directors remuneration and directors salary?

As per Section 16 read with Section 192 of Income Tax Act, 1961, all directors remuneration are treated as Salary and will be taxable under the head “Salary” and Company is required to deduct TDS except the sitting fees.

Is salary part of remuneration?

Remuneration is a broad-based term that is meant to represent all the ways in which an employee is compensated for labor and his or her role within a company. A salary, on the other hand, is a subset of remuneration, and refers to a fixed payment for labor or services that is provided on a regular basis.

What is example of remuneration?

Remuneration is the total compensation received by an employee. It includes not only base salary but any bonuses, commission payments, overtime pay, or other financial benefits that an employee receives from an employer. An on-site gym or a generous vacation plan are perks but they aren’t money in an employee’s pocket.

How to pay Managerial Remuneration in absence of profit?

Therefore, it is important to know what compliances are needed to be done to pay managerial remuneration in case of no profits. Hold a meeting of the Nomination and Remuneration Committee (NRC) to discuss the salary. Hold EGM to pass the special resolution for the proposed salary.

When to not pay remuneration to managing director?

If in any financial year, a company has no profits or its profits are inadequate, the company shall not pay to its directors, including any managing or whole-time director or manager, by way of remuneration any sum exclusive of any fees payable to directors under sub-section (5) hereunder except in accordance with the provisions of Schedule V.

Are there limits on remuneration during period of inadequate profit?

These limits may be applied on a pro-rata basis for a remuneration period less than one year. Such amount given in the table may be given by passing an ordinary resolution. However, any amount beyond the limited set out in the table may be given by passing a special resolution.

When is an independent director entitled to remuneration?

Accordingly, it is amended by inserting a new proviso in section 149 (9), which provides that an independent director may receive remuneration, if a company has no profits or inadequate profits in accordance with Schedule V of the Act.