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Thursday, January 3, 2008

Remuneration Payable by Companies having Profits

Subject to the provisions of Sections. 198 and 309, a company having profits in a financial year may pay any remuneration, by way of salary, dearness

allowance, perquisites, commission and other allowances, which shall not exceed 5 per cent of its net profits for one such managerial person, and if there

are more than one such managerial persons, 10 per cent for all of them together.

Remuneration Payable by Companies Having No Profits or Inadequate Profits

Where in any financial year during the currency of tenure of the managerial person, a company has no profits or its profits are inadequate, it may pay

remuneration to a managerial person, by way of salary, dearness allowance, perquisites and any other allowance, not exceeding ceiling limit of Rs.

24,00,000 per annum or Rs. 2,00,000 per

month calculated on the followinq.scale:’

Where the effective capital Monthly remuneration

of a company is payable shall not exceed

(j) Less than Rs. 1 crore Rs. 75,000

(ii) Rs. 1 crore or more but less than Rs. 5 crores Rs. 1,00,000

(iii) Rs. 5 crore or more but less than Rs. 25 crores Rs.1,25,000

(iv) Rs. 25 crore or more but less than Rs. 50 crores Rs.1,50,000

(v) Rs. 50 crores or more but less than Rs. 100 crores Rs. 1,75,000

(vi) Rs. 100 crores or more Rs.2,00,000

However, to pay the remuneration to a managerial person as per the aforesaid ceiling limits, it has been made mandatory. to seek approval by way of a

resolution passed by the Remuneration Committee. Besides, the company should not have made any default in repayment of any of its debts (including

public deposits) or debentures or interest payable thereon for a continllolls period of thirty days in the precedingftnancial year before the date of

appointmmt of such managerial person.

Vide its Notification dated 16.1.2002, the Central Government ha’s allowed companies to pay remuneration to their managerial personnel up to double the

amount of the aforesaid ceiling by observing the required procedure as stated above and passing a special resolution at the general meeting, the notice

of which must be accompanied

by a statement containing the specified particulars. The remuneration fixed by way of special resolution, as aforesaid, shall be valid for a period not

exceeding three years.

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