Draft Board Resolution on Remuneration for Directors

Directors are the heart of companies. They are responsible for ensuring the smooth affairs of the company. Continuous efforts are framed by directors to make company more successful. Future well-being of the company highly depends on strategies and planning of the board of directors. The services provided by directors are liable for reward, and this reward is termed as ‘remuneration’. Simply, remuneration means compensation paid to the directors of the company by way of professional fees, salary with the prior approval of shareholders and board of directors of the company. Managerial remuneration is the reward paid to the directors or key managerial personnel (KMP) for the professional services provided by them.

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Permissible Limit for Managerial Remuneration

Yes there is permissible limit for payment of managerial remuneration.As per the provisions of Companies Act, 2013 maximum ceiling for director’s remuneration is applicable to Sec 197 of the Companies Act, 2013, maximum ceiling for director’s remuneration by public companies to its director, whole time director or manager should not exceed the 11% of the net profit of the company in that financial year computed in accordance with section 198 except that the remuneration of the directors shall not be deducted from the gross profits.

Read : Understand Director Remuneration 

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Can permissible limit of managerial remuneration be increased more than 11%?

Definitely yes. The companies can increase managerial remuneration more than 11% of the net profit of the company in that financial year computed in accordance with section 198 by passing a special resolution and taking due approval of shareholders of the company.

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Is there any penalty for contravention of sec 197 of Companies Act, 2013?

Yes surely there is huge penalty for contravention of sec 197 of the Companies Act, 2013. . Minimum fine of Rs.1 Lakh and a maximum fine of Rs. 5 Lakhs.

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Format of Board resolution on Remuneration for Directors

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CERTIFIED COPY OF THE RESOLUTIONS PASSED AT THE BOARD MEETING OF ………………………………………………………. PRIVATE LIMITED HELD ON ……………………………………AT THE REGISTERED OFFICE OF THE COMPANY AT —————————————————————————————–AT 11.00 A.M AND CONCLUDED AT 11:30 A.M

REMUNERATION OF MR ………………………………… DIN………………….. BEING MANAGING DIRECTOR/WHOLE TIME DIRECTOR/CEO/COMPANY SECRETARY OF THE COMPANY

“RESOLVED THAT Pursuant to the provisions of Section 197 read with Part I and Section I of Part II of Schedule V and other applicable provisions, if any, of the Companies Act, 2013 (including any statutory modification or re-enactment thereof), applicable clauses of the Articles of Association of the Company and recommendation of the Nomination and Remuneration Committee and Audit Committee, approval of the Company be and is hereby accorded for payment of remuneration to Mr. …………………………… [DIN: ……………………..], Managing Director/Director/CEO/Company Secretary of the Company, on the terms and conditions including remuneration as mentioned below:

 

1	Basic Salary: Rs.10,00,000/- per month w.e.f. April 01, 2019
2	Commission: Not exceeding 1 (one) percent of net profit in an accounting year of the Company subject to availability of profit w.e.f. FY 2019-2020
3	Free furnished accommodation with gas, electricity, water, furnishing, servants, security, drivers etc.
4	Reimbursement of medical expenses incurred in India or abroad including hospitalisation, nursing home and surgical charges for himself and family subject to ceiling of one month salary in a year.
5	Reimbursements of travelling expenses with family to anywhere in India or abroad as per rules of the Company.
6	Medi claim Insurance Policy, premium and personal accidents not to exceed Rs. 1,00,000/- per annum
7	Car, Telephone, Cell Phone, PC shall be provided and their maintenance and running expenses shall be met by the Company. The use of above at residence for official purpose shall not be treated as perquisites.
8	Other benefits like Gratuity, Provident Fund, Leave etc. as applicable to the employees of the Company.

PERQUISITES: In addition to salary he shall be entitled to perquisites and allowances like HRA, medical reimbursement, travelling allowances, club fees and other payments in the nature of perquisites and allowances as agreed by the Board of Directors, subject to overall ceiling of remuneration stipulated in sections 2(78) and 197 read with Schedule V of the Act.

FURTHER RESOLVED THAT in the event of loss or inadequacy of profits in any financial year during the aforesaid period, the Company will pay Shri ……………………………………………, remuneration and perquisites not exceeding the ceiling laid down in Schedule V to the Companies Act, 2013, as may be decided by the Board of Directors

FURTHER RESOLVED THAT the Board of Directors be and is hereby authorised to accept such modification/s in the terms and conditions, which the Central Government may direct, if so required, and as may be acceptable to the Company and Shri …………………….

FURTHER RESOLVED THAT, Board of Directors of the Company be and is hereby authorised severally to do all such acts, deeds, matters and things as may be considered necessary or desirable to give effect to this resolution and matters incidental thereto.”

For And On Behalf Of

………………………………………………….PRIVATE LIMITED

 

                                               

Director                                                                                                          Director

DIN:                                                                                                                 DIN:

 

Date:

Place:

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