Civil Procedure Code (CPC)

Managerial Remuneration: Waiver of Approval (Circular)

Proprietor

 

General Circular No. 46/2011

No 14/03/2011/CL.VII

Government of India

Ministry of Corporate Affairs

5th floor, ‘A’ Wing, Shastri Bhawan,

Dr. Rajendra Prasad Road, New Delhi

Dated: 14.07.2011

To,

All the Regional Directors,

All the Registrar of Companies,

All Stakeholders

Sub: Waiver of approval of Central Government for payment of

remuneration to professional managerial person by companies

having no profits or inadequate profits

Sir,

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

2. 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.

3. 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.

4. 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.

----------------------------end of the document-----------------------------

 
Reply   
 
Advocate and Corporate Consultant

Dear Sir,

No doubt, it is a welcome gesture but, most of the managerial personnel are from the Promoters' Group who naturally hold interest in the capital of the company and they do not stand to gain out of the above relaxation. They also deserve to be given the same benefit with some riders like, good professional and academic background and consist profit making by the companies under their management etc.,

Regards,

Murali Krishna W

 

 
Reply   
 


Company Secretary

initiatives taken by the goverment should be appreciated positively that at least they have relieved independent directors having profession qualification, from taking prior approval for geting their remuneration which they deserve....and thanks for amit for sharing info. with us.

 
Reply   
 
Legal Advisor

Dear Amit

In my view without any prejudice the above amendmant is ambiguous and leads to more complication when it comes to practical approach. Firstly how it is established that the managerial person doesn't have any direct or indirect interest in the capital of the company in view of his designation, roles and responsibilites . Secondly we can't expect any expert or specialized knowledge from the grduate person. The second cirterion must be start with "Post Graduate" qualification.   

 
Reply   
 
Proprietor

Dear All,

 

First of all as the promoters are interested person in the capital of the company and holds strong position in the company, so from point of view they have to controlled by Government.

Secondly, to establish the interest in capital he should not hold any share in any capacity whether as partner, director or else. You can expect the expert knowledge of the relevant field because for the post of CEO or CFO or Manager you can not recruit a simple graudate without experience. Even if you have a Sceince graduate who can formulate a paint for you, Can be given a high salary.

 
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