DIRECTOR REMUNERATION LIMIT

[Guest]

Dear

Can we pay director remuneration more than 11% of profit , without  any permission of central govt.

 

[shanker bansal]

[YAGAY andSUN]

The total managerial remuneration payable by a public company to its directors and manager shall not exceed 11% of net profits of that company, computed in accordance with sections 349 and 350, except that remuneration of the directors shall not be deducted from the gross profits. [section 198(1)]. Ceiling on remuneration payable to MD / WD together shall not exceed 5% if there is only one MD / WD. If there are more than one MD / WD, the remuneration shall not exceed 10% of net profits for all of them together.

No approval or restrictions  in case of private company - No approval of Central Government is necessary for appointment or re-appointment of a ‘Managerial Person’ of a private company which is not a subsidiary of a public company. In such companies, there are no restrictions regarding remuneration or terms and conditions, as per section 269(2).

Broadly, Approval or appointment of Managerial Person from Central Government is necessary only in following cases - (a) He has been convicted under economic offence (b) He has been detained under COFEPOSA (c) His age is over 18 but less than 25 or over 70 years of age and special resolution is not passed in the general meeting. (d) He is non-resident and was not staying in India for at least 12 months prior to his appointment. or (e) Remuneration proposed is more than the amount prescribed in Part II of Schedule XIII. In all other cases, approval of Central Government is not necessary.

[Guest]

Dear,

our unit is Ltd compay.

Having Annual turnover is 28 crore with the Np of 75 Lacs .

Pl. guide upto what amount we can pay director remuneration.

& what are the conquence if we pay director remuneration more than 10%. 

AI Summary

Public companies need central approval for director pay over 11% of profits; specific limits for MD/WD apply. A public company cannot pay director remuneration exceeding 11% of net profits without central government approval, as per sections 349 and 350. For a Managing Director (MD) or Whole-time Director (WD), the limit is 5% for one MD/WD, and 10% for multiple MD/WDs combined. Private companies not subsidiaries of public companies face no such restrictions. Central government approval is required only under specific conditions, such as economic offenses or specific age criteria. A company with a net profit of 75 lakhs must adhere to these limits, or face potential legal consequences for exceeding the 10% remuneration cap.