Tag Archives: Key managerial personnel

Managerial Remuneration during period of inadequate profit


[NOTE: The law stated in this post is effective from 12th September 2018. For the law applicable from 1st April 2014 till 11th September 2018, please visit here and here.]

Any managerial remuneration exceeding 11% of net profit limit may be payable subject to compliance of conditions given in Schedule V.

Where a remuneration of managerial personal exceed respective limits of 1%, 3% 5%, or 10%  specified in section 197 in any manner, it becomes remuneration in case of the inadequate profit and attracts approval company in general meeting by special resolution, subject to the provisions of Schedule V.

We have discussed Section 197 as amended update 12th September 2018 earlier here. In this post, we will discuss managerial remuneration in case of inadequate profit as per Schedule V as on 12th September 2018.

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MANAGERIAL REMUNERATION


[NOTE: The law stated in this post is effective from 12th September 2018. For the law applicable from 1st April 2014 till 11th September 2018, please visit here and here.

In this post, we will discuss managerial remuneration. The managerial remuneration in case of inadequate profit shall be discussed in a future post, soon.

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APPOINTMENT OF MANAGING DIRECTOR AND MANAGER


[NOTE: The law stated in this post is effective from 12th September 2018. For the law applicable from 1st April 2014 till 11th September 2018, please visit here.]

The Managing Director is Key Managerial Personnel of utmost importance. He is the face of a company and its decision-making mechanism. A person gains significant advantages as the Managing Director which may not be there, in case of his appointment as the Manager or the Chief Executive Officer. While the Chief Executive Officer has no special advantage except his clubbing as a Key Managerial Personnel with the Manager and the Managing Director, the Manager has some advantage. Their definitions speak themselves. Appointment of Managing Director, Whole – Time Director and Manager is governed by the provision of Section 196 of the Companies Act, 2013. They all are a different class of Key Managerial Personnel and has the specific provision of appointment in addition to Section 203, discussed in an earlier post. Continue reading

REPORT OF THE COMPANIES LAW COMMITTEE – 6


On 1st February 2016, Ministry of Corporate Affairs uploaded the report of Companies Law Committee on its website here. In 6th post on this report, we will discuss recommendations of the committee related to Related Party transaction, Audit Committee, Managerial Remuneration, Key Managerial Personnel, etc.

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COMPANY SECRETARY – REPORT of THE COMPANIES LAW COMMITTEE


On 1st February 2016, Ministry of Corporate Affairs uploaded the report of Companies Law Committee on its website here. In this post, I will discuss recommendations which might affect Company Secretaries.

Before reading further, I would like to disclose that I was part of two groups; Task Force on Companies Law and Research Group on Companies Law constituted by the Institute of Company Secretaries of India. All view here are personal and not of these groups or ICSI.

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MCA Clarification on Section 185 (14 Feb 2014)


Ministry of corporate Affairs has issued a General Circular on 14th February 2014. My readers can download this Circular from MCA site link here.

We have already discussed Section 185 in one of the earlier post here.

The Section under discussion basically says, No company shall, directly or indirectly, advance any loan, including any loan represented by a book debt, to any of its directors or to any other person in whom the director is interested or give any guarantee or provide any security in connection with any loan taken by him or such other person.

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LOAN AND INVESTMENT


LOAN TO DIRECTORS, ETC. (SECTION 185):

No company shall, directly or indirectly, advance any loan, including any loan represented by a book debt, to any of its directors or to any other person in whom the director is interested or give any guarantee or provide any security in connection with any loan taken by him or such other person.

This provision shall not apply to –

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BOARD MEETING UNDER COMPANIES ACT 2013


UPDATE: on 30th August 2013: Companies Bill 2012 became the Companies Act, 2013 (Act 18 of 2013).

The Board of Directors is most powerful body in a company. The Corporate governance is until now is governance of the Board.

The Companies Bill 2012 has dedicated chapter i.e. Chapter XII dealing with Board meetings and its power.  In this blog I will discuss Board Meetings and in a future post power of Board of Directors.

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BOARD COMMITTEES IN COMPANIES ACT 2013


UPDATE: on 30th August 2013: Companies Bill 2012 became the Companies Act, 2013 (Act 18 of 2013).

Delegation of Power is buzz word in this Companies Bill 2012. This delegation is not only from legislature to Executive but also from Board of Directors to its committees. Committees are not new to Indian Corporate Jurisprudence. Audit Committee was introduced in the present Companies Act, 1956 twelve years ago in year 2000. Schedule XII also has Remuneration committee.

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MANAGERIAL REMUNERATION IN CASE OF IN ADEQUATE PROFIT


UPDATE: on 30th August 2013: Companies Bill 2012 became the Companies Act, 2013 (Act 18 of 2013).

Managerial remuneration is one of major corporate governance issue in India. Promoters and controlling shareholders consider themselves owner of company and get maximum remuneration. Difference between corporate tax rate and income tax rate also priority to withdraw much money from “owned” company. Indian concept of “owned company” and corporate governance has co – existence in last two decades.

In my last post, I did not analyse legal issues of managerial remuneration in case of inadequate profit under Companies Bill 2012 (Now the Act).

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APPOINTMENT OF MANAGING DIRECTOR AND MANAGER


UPDATE: on 30th August 2013: Companies Bill 2012 became the Companies Act, 2013 (Act 18 of 2013).

[NOTE: The law stated in this post is effective from 1st April 2014 till 11th September 2018. For the law applicable from 12th September 2018, please visit here]

Managing Director is Key Managerial Personnel of utmost importance. He is the face of a company and its decision-making mechanism. A person gains significant advantages as Managing Director which may not be there, in case of his appointment as Manager or Chief Executive Officer. While Chief Executive Officer has no special advantage except his clubbing as Key Managerial Personnel with Manager and Managing Director, Manager has some. Their definitions speak themselves. Appointment of Managing Director, Whole – Time Director and Manager is governed by the provision of Section 196 of the Bill. They all are a different class of Key Managerial Personnel and has the specific provision of appointment in addition to Section 203, discussed in an earlier post.

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APPOINTMENT AND QUALIFICATION OF DIRECTOR


UPDATE: on 30th August 2013: Companies Bill 2012 became the Companies Act, 2013 (Act 18 of 2013).

I discussed in my last post that it is first time that concept of “Key Managerial Personnel” has been introduced in India. Hopefully, present Companies Bill will change status of Corporate Governance in India. The qualified Directors and transparency in appointment of directors is single most important key for success of public corporate and corporate governance. As I discussed, appointment of “Key Managerial Personnel” is discussed in Section 203 but specific provisions of Chapter XI should be taken care of in case of appointment of Directors as they are specific provisions for them. Chapter XI consists of 23 Section from Section 149 to Section 172.

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KEY MANAGERIAL PERSONNEL


UPDATE: on 30th August 2013: Companies Bill 2012 became the Companies Act, 2013 (Act 18 of 2013).

In any jurisdiction, Quality of Corporate Governance and compliance of ethics depends upon quality of people taking charge of the affairs. The companies Bill 2012 have some inbuilt elements of corporate governance in it. First time Concept of Key Managerial Personnel is being introduced in India. Which seems different with “officer who is in default” as that concept is still in this Bill.

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