Remuneration means any money or its equivalent given or passed to any person for services rendered by him and includes perquisites as defined under the Income-tax Act, 1961. [Section 2(78)]
The remuneration payable to the Directors of a Company, including any Managing or Whole-time Director or Manager, shall be determined, in accordance with the provisions of section 197 by way of
- articles of the company, or
- a resolution, or
- a special resolution, if the articles so require, passed by the Company in General Meeting.
The remuneration payable to a Director determined aforesaid shall be inclusive of the remuneration payable to him for the services rendered by him in any other capacity. [Section 197(4)]
- Section 2, 173, 178 & 197 of Companies Act, 2013
- Regulation 30, 44 and 46 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015
- The total managerial remuneration payable by a public company, to its directors, managing director, whole-time director and its manager in respect of any financial year shall not exceed eleven percent of the net profits of that company for that financial year. [Section 197(1)]
- When 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 sitting fees to directors except in accordance with the provisions of Schedule V. [Section 197(3)]
Following Procedure is to be followed
- Meeting of Nomination and Remuneration Committee
Where a Company is required to constitute a Nomination and Remuneration Committee under section 178, shall receive a recommendation from the committee for increase in remuneration of Managerial Personnel. [For convening meeting of Nomination and Remuneration Committee, Refer the Procedure for Conducting Nomination and Remuneration Committee Meeting].
- Convene a Meeting of Board of Directors [As per section 173 & SS-1]
- Issue Notice of Board Meeting to all the Directors of Company at their addresses registered with the Company, at least 7 days before the date of Board Meeting. A shorter notice can be issued in case of urgent business.
- Attach Agenda, Notes to Agenda and Draft Resolution with the Notice.
- Hold a meeting of Board of Directors of the Company and pass the necessary Board Resolution
- to consider and approve increase in remuneration of managerial personnel.
- to fix day, date, time and venue for holding General Meeting of the Company.
- to approve the draft notice of General Meeting along with explanatory statement annexed to the notice as per requirement of the Section 102 of the Companies Act, 2013.
- to authorize the Director or Company Secretary to sign and issue notice of the General Meeting and to do such acts, deeds and things as may be necessary to give effect to the Board’s decision.
- to delegate authority to Company Secretary or any one director of the company to sign, certify and file the required form with Registrar of Companies and to do all such acts and deeds as may be necessary to give effect to the Board’s decision.
- Prepare and Circulate Draft Minutes within 15 days from the conclusion of the Board Meeting, by Hand/Speed Post/Registered Post/Courier/E-mail to all the Directors for their comments. [Refer the Procedure for Preparation and Signing of Minutes of Board Meeting]
- File Form MGT-14 with ROC
Company shall file a copy of Board Resolution passed for increase in remuneration of Managing Director with the ROC in form MGT-14 within 30 days of passing of such resolution.
- Approval from Bank and PFIs [Section 197(1)]
Where the company has defaulted in payment of dues to any bank or public financial institution or non-convertible debenture holders or any other secured creditor, the prior approval of the bank or public financial institution concerned or the non-convertible debenture holders or other secured creditor shall be obtained by the company before obtaining the approval in the general meeting.
- Convene General Meeting [Section 96, 100 and SS-2]
- Notice of General Meeting shall be given at least clear 21 days before the actual date of a General Meeting in writing, by hand or by ordinary post or by speed post or by registered post or by courier or by facsimile or by e-mail or by any other electronic means or a Shorter Notice can be issued with the consent of at least majority in number and ninety five percent of such part of the paid up share capital of the company giving a right to vote at such a meeting in accordance with Section 101.
- Notice will be sent to all the Directors, Members, Auditors of Company, Secretarial Auditor, Debenture Trustees and to others who are entitled to receive the notice of the General Meeting.
- Notice shall specify the day, date, time and full address of the venue of the Meeting and contain a statement on the business to be transacted at the Meeting.
- Hold the General Meeting on fixed day and pass Ordinary/Special Resolution for increase in remuneration of managerial personnel.
- Listed Companies shall disclose the proceedings of General Meeting to the Stock Exchange within 24 hours from the conclusion of General Meeting and same shall be posted on the website of the company within 2 working days. [Regulation 30 and 46(3) of the SEBI (LODR) Regulations, 2015]
- Listed Companies shall submit to the stock exchange the details of the voting results within two working days from the conclusion of the meeting and post the same on the website of the Company. [Regulation 44 of the SEBI (LODR) Regulations, 2015]
- Prepare the minutes of General Meeting, get them signed and compile accordingly. [Refer the Procedure for Preparation and Signing of Minutes of General Meeting].
- File Form MGT-14 with ROC
File Form MGT-14 with the ROC within 30 days of passing Special Resolution in General Meeting along with fee as specified in the Companies (Registration offices and fees) Rules, 2014 and with the following attachments
- Certified True Copies of the Special Resolution passed along with Explanatory Statement.
- Copy of the Notice of meeting sent to members along with all the annexure
- Shorter Notice Consent Letters from the members in case the General Meeting was convened at shorter notice.
- Copy of Attendance Sheet of General Meeting
- Any other attachment as may be applicable.