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What is that Overall maximum managerial remuneration in case of absence or inadequacy of profits?

Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 aliya bhat asked over 2 years ago

Hi I am one of the CS student. In that company law subject is there. I am having doubt about that subject. What is that Overall maximum managerial remuneration in case of absence or inadequacy of profits?

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3 Answers
Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 veeru answered over 2 years ago

Now, section 197 of CA, 2013 provides for overall maximum managerial remuneration and managerial remuneration in case of absence or inadequacy of profits. Sub-section (1) of said section states that “the total managerial remuneration payable by a public company….” makes it applicable only to public company. Clearly, this excludes private company from purview of overall managerial remuneration. However, further said section frustrates the flow when in sub-section (3) its provides that “Notwithstanding anything contained in sub-section (1) and (2), but subject to the provision of Schedule V, if, in any financial year, a company has no profits or its profits are inadequate, the company shall not pay to its directors……”. The absence of clear wording “a public company” in sub-section (3) in place of “a company” tantamount to make this section applicable to private company for paying managerial remuneration in case it has no profit or its profits are inadequate.

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 Aarti Vadnerkar answered over 2 years ago

Now, section 197 of CA, 2013 provides for overall maximum managerial remuneration and managerial remuneration in case of absence or inadequacy of profits. Sub-section (1) of said section states that “the total managerial remuneration payable by a public company….” makes it applicable only to public company. Clearly, this excludes private company from purview of overall managerial remuneration. However, further said section frustrates the flow when in sub-section (3) its provides that “Notwithstanding anything contained in sub-section (1) and (2), but subject to the provision of Schedule V, if, in any financial year, a company has no profits or its profits are inadequate, the company shall not pay to its directors……”. The absence of clear wording “a public company” in sub-section (3) in place of “a company” tantamount to make this section applicable to private company for paying managerial remuneration in case it has no profit or its profits are inadequate. d) However, to author it appears that, however the wording may be construed as ambiguous, sub-section (3) of section 197 of CA, 2013 does not apply to private companies in so far as payment of remuneration to managerial personnel is concerned in case it has no profit or its profits are inadequate. e) The reason for this being that, sections 197 read with Schedule V of CA, 2013 seek to control and regulate remuneration payable to managerial personnel. However, as regards, overall remuneration sub-section (1) and (2) of section 197 of CA, 2013 excludes private company from its purview. Sub-section (3) is corollary to sub-section (1) and (2). Since sub-section (1) and (2) is not applicable to private company clearly sub-section (3) cannot be made applicable by reading in “private company” as well in sub-section (3). On the contrary, the intent of statute does not seems to regulate private companies for the purpose of remuneration and therefore, “a company” in sub-section (3) of section 197 of CA, 2013 is to be understood as “a public company”. Hence, the said sub-section has to be read in conjunction with the other sub-sections, which refer to the limit being applicable to a public company as well as issues surrounding the nomination and remuneration committee, which is also applicable only to public companies.

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Open uri20170510 32134 1uwcnoc?1494421631 Shubhangi Jain answered over 2 years ago

In any financial year, 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 any fees payable to directors for each meeting of the Board, or a committee thereof, attended by him, except with the previous approval of the Central Government.

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