MCA Update – Ease in approval of Managerial Remuneration

Ministry of Corporate Affairs (MCA) vide notification dated 12th September, 2018 has made effective few more sections of Companies Amendment Act, 2017. The list of sections is mentioned below:

Sr. No.	Section of the Companies Act, 2017	Section of the Principal Act, 2013	Particulars
1.	66	196	Appointment of Managing Director, Whole-time Director or Manager
2.	67	197	Overall Maximum Managerial Remuneration and Managerial Remuneration in Case of Absence or Inadequacy of Profits
3.	68	198	Calculation of Profits
4.	69	200	Central Government or Company to Fix Limit with Regard to Remuneration
5.	70	201	Forms of, and Procedure in Relation to, Certain Applications

 The key highlights of the amendment are as follows:

1.  Any person who has completed the age of seventy years can be appointed as Managerial personnel by taking shareholders’ approval in the form of special resolution. However, if where no such special resolution is passed but votes cast in favour of the motion exceed the votes, if any, cast against the motion, the person can be appointed with the approval of Central Government. [Applicable to Private and Public Companies]     
2. In case of Public Companies,
1. Approval of Central Government is required for appointment of managerial personnel in case if the conditions specified in Part I of the Schedule V are not complied with.
2. Approval of Central Government is not required for the payment of remuneration exceeding 11% of the net Profit of the company subject to compliance of schedule V and by passing Special resolution in General Meeting.
3. Prior approval of following is required before obtaining the approval in the general meeting (for paying remuneration in excess of limits and in case of waiver of remuneration paid in excess of limits as mentioned section 197 read with schedule V)in case if the Company has defaulted in payment of dues from: 
1. Any Bank
2. Public Financial institutions     
3. Non-Convertible Debentures holders
4. Other secured creditors
3. The Auditor has to make statement in his audit report about the compliance of section 197 and schedule V
4.  4. All the applications which are pending with that Central Government shall stand abate, and the Companies shall obtain the approval in accordance with the revised provisions within a period of one year.

Further, to give effect to this notification, MCA has also amended the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 and schedule V. 

Disclaimer:   The article is not intended to replace appropriate professional advice required before acting on any matter. MMJC assumes no responsibility in respect of anything done or omitted to be done by person in reliance on the contents of this article.