Press Information Bureau

Government of India

Ministry of Corporate Affairs

19-July-2011 17:47 IST

Waiver of approval of Central Government for payment of remuneration to professional managerial person by companies having no profits or inadequate profits

In order to promote the development of Indian Corporate sector and another step towards simplification of procedure under the Companies Act, 1956, the Ministry of Corporate has decided to amend Schedule XIII to the Companies Act, 1956 w.e.f.14.7.2011.

Pursuant to this amendment, no approval of Central Government will be required by the listed companies and their subsidiary companies, which are not having profits or having inadequate profits for payment of remunerations exceeding Rs. 4 lakh p.m., if the managerial person:-

(a) is not having any direct or indirect interest in the capital of the company or its holding company or through any other statutory structures at any time during last two years before or on the date of appointment and

(b) is having a graduate level qualification with expert and specialized knowledge in the field of his profession.

The other general conditions specified in para (c) of Section II of Part II of Schedule XIII to the Act shall continue to be complied with.

At present, listed companies and their subsidiaries companies, which are not having profits or having inadequate profits, have to come to the Central Government for seeking approval for payment of remunerations exceeding Rs. 4 lakh p.m. even to professional managerial person, who has no interest in the capital or any relation with the directors of the company.

*****

ST/-

Waiver of government approval permits listed companies without profits to pay high remuneration to qualified professional managers subject to conditions. Amendment to Schedule XIII waives Central Government approval for listed companies and their subsidiaries without profits or with inadequate profits to pay remuneration above the prescribed threshold to a professional managerial person, provided the person had no direct or indirect interest in the company's or holding company's capital during the two years before or on appointment and holds a graduate-level qualification with expert or specialized professional knowledge; other general conditions in paragraph (c), Section II, Part II of Schedule XIII remain applicable.