Managerial renumeration includes pay, compensation or reward for work provided to a managerial person. The following types of expenditure incurred by a company are also termed as managerial renumeration.
- Expenditure incurred by the company in providing rent free accommodation, or any other benefit or amenity, free of charge, to any of the company’s director and manager.
- Expenditure incurred by the company in providing any other benefit or amenity free of charge or at a concessional rate to any of the company’s director or manager.
- Expenditure incurred by the company in respect of any obligation or service, which, but for such expenditure by the company, would have been incurred by any of the company’s director or manager.
- Expenditure incurred by the company to effect any insurance on the life of, or to provide any pension, annuity or gratuity for, any of the company’s director and manager or his/her spouse and/or child.
- Expenditure incurred by the company on behalf of its managerial person for indemnifying them against any liability in respect of any negligence, default, misfeasance, breach of duty or breach of trust for which they maybe guilty in relation to the company and if such person is proved to be guilty, the premium paid on such insurance would be treated as part of its renumeration.
- Expenditure incurred by the company for maintenance of vehicles pertaining to personal use by director or manager.
Managerial Renumeration- Company Having Profit
A company can pay any renumeration by way of salary, dearness allowance, perquisites, commission and other allowances not exceeding 5% of its net profit for one managerial person. If there are more than one managerial person, then managerial renumeration cannot exceed 10% of net profit for all of the managerial persons together.
Managerial Remuneration in a Company
- Overall Maximum and Minimum Remunerations Legal Restrictions
- Remuneration to Directors
- Remuneration to Manager
- Provisions (Part II of Schedule XIII read with Sees. 198, 269, 310 and 311)
- Tutorial Note
- Schedule XIII to the Companies Act: Managerial Remuneration and other details.
Overall Maximum and Minimum Remunerations Legal Restrictions:
The Companies Act provides some restrictions on the managerial remuneration provided by a private company (a subsidiary of a public company) or a public company.
These restrictions are enumerated:
According to Sec. 198 of the Companies act, the total managerial remuneration payable by a public company or a private company which is subsidiary of a public company to its directors and its managers in respect of a financial year computed in the manner laid down in Sections 349, 350 and 351-except that the remuneration of the directors shall not be deducted from the gross profit.
According to Sec. 198 (Subsection 4) of the Companies (Amendment) Act, 1988-subject to the provisions of Sec. 269 (Schedule XIII)-a 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 Sec. 309 (2) except with the previous approval of the Central Government, if the company has inadequate profits or no profits in any financial year. This is subject to the of Sec. 209 (which deals with appointment of managing or whole time Director or manager) read with Schedule XHL
Remuneration to Directors:
The remuneration to Directors is governed by Sec. 309 of the Companies Act, which is to be determined by the Articles or by the resolution (special resolution if the articles so require).
Fees may be payable by the articles for attendance of the meeting of the board or committee subject to:
- A whole-time or managing director may be paid remuneration by way of monthly pay and/or specified percentage of net profit of the comp iny (not exceeding 5% where there is only one such director, and not exceeding 10% in all where there are more than one whole-time director).
- A part-time director (i.c., not whole-time or managing director) may be remunerated either by way of monthly, quarterly or annually (with the approval of the Central Government or by way of commission (if the company by special resolution authorizes) not exceeding 1% for all such Directors, Secretaries, Treasurers or Managers and not exceeding 3% for all such Directors in other cases, or at higher percentage with the approval of the Central Government.
- Any whole-time or managing director shall not be entitled to receive any commission from any subsidiary of such company.
- The special resolution shall remain in force for a maximum period of 5 years. It may, however, be renewed, from time to time, by a special resolution for further periods of 5 years but no renewal can be effected earlier than 1 year from the date on which it is to come into force.
- A Director may be paid fees for attending each meeting of the Board or a committee thereof attended by him.
- If any Director receives any sum in excess of remuneration due to him, he shall keep the excess amount in trust for the company and shall refund it to the company. The company, however, cannot waive the recovery of any such sum.
- The above rules shall not apply to a private company unless it is a subsidiary of a public company.
- Prohibition of tax-free payment. A company shall not pay any officer or employce remuneration free of tax (Sec. 200).
- The net profit for the purpose of Directors’ remuneration shall be computed as per prescribed manner laid down in Sections 349 and 350 without deducting the Directors’ remuneration from the gross profit.
However, Sec 310 of the Companies Act, 1956, provides that any increase in remuneration of any Director of a public company or a private company which is a subsidiary of a public company, shall not be valid:
- In case where Schedule XIII is applicable (unless such increase is as per the conditions specified in that Schedule) and
- In any other case, unless the same is approved by the Central Government.
Sec. 309 does not apply to a private company unless it is a subsidiary of a public company.
It should be noted that the remuneration payable to a director shall include all remuneration payable to him for services rendered in any other capacity unless the services are rendered in professional capacity and the director possesses the requisite qualifications for the practice of the profession in the opinion of the Central Government.
Remuneration to Manager :
According to Sec. 2 (24), ‘Manager’ means an individual who has the management of the whole or substantially the whole of the affairs of a company. He is actually subject to the superintendence, control and directions of the Board of Directors. Thus, Manager’ includes a director or any other person accompanying the position of a manager-by whatever name called.
A company cannot have more than one manager at a time:
The remuneration to manager is governed by Sec. 387 of the Companies Act. The manager of a company may receive remuneration by way of a monthly payment and/or by way of a specified percentage on net profit calculate according to Sces. 349, 351 provided that such remuneration shall not exceed in the aggregate of 5% of the net profit without the approval of the Central Government- Sec. 387.
The provisions do not apply to private company unless it a subsidiary of public company.
- Professional Management- Functions, Objectives, Responsibility
- Role of Professional Management in Corporate Sector
- Professional Management- Definition, Nature, Features, Scope
- Role & Importance of Professional Managers in Business Organizations
- Conflict in Organisation- Positive & Negative Effects
- Types of Conflict in Organisational Behaviour
- Why Employees Resist Change in the Workplace
- Conflict Management Technique- Conflict Resolution & Stimulation
Disclaimer: wandofknowledge.com is created only for the purpose of education and knowledge. For any queries, disclaimer is requested to kindly contact us. We assure you we will do our best. We do not support piracy. If in any way it violates the law or there is any problem, please mail us on firstname.lastname@example.org