Appendix 19

CONDITIONS TO BE FULFILLED FOR THE APPOINTMENT OF A MANAGING OR WHOLE‑TIME DIRECTOR OR A MANAGER WITHOUT THE APPROVAL OF THE CENTRAL GOVERNMENT

SCHEDULE XIII

(See sections 198, 269, 310 and 311)

Conditions to be fulfilled for the appointment of a managing or whole‑time director or a manager without the approval of the Central Government.

PART I

APPOINTMENTS

No person shall be eligible for appointment as a managing or whole‑time director or a manager (hereinafter referred to as managerial person) of a company unless he satisfies the following conditions, namely

(a) he had not been sentenced to imprisonment for any period, or to a fine exceeding one thousand rupees, for the conviction of an offence under any of the following Acts, namely:

(i) the Indian Stamp Act, 1899 (2 of 1899),

(ii) the Central Excises and Salt Act, 1944 (1 of 1944),

(iii) the Industries (Development and Regulation) Act, 1951(65 of 1951),

(iv) the Prevention of Food Adulteration Act, 1954 (37 of 1954),

(v) the Essential Commodities Act, 1955 (10 of 1955),

(vi) the Companies Act, 1956 (1 of 1956),

(vii) the Securities Contracts (Regulation) Act, 1956 (42 of 1956),

(viii) the Wealth‑tax Act, 1957 (27 of 1957),

(ix) the Income‑tax Act, 1961 (43 of 1961),

(x) the Customs Act, 1962 (52 of 1962),

(xi) the Monopolies and Restrictive Trade Practices Act, 1969(54 of 1969),

(xii) the Foreign Exchange Regulation Act, 1973 (46 of 1973),

(xiii) the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986),

(xiv) the Securities and Exchange Board of India Act, 1992 (15 of 1992),

(xv) the Foreign Trade (Development and Regulation) Act, 1992 (22 of 1992);

(b) he had not been detained for any period under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 (52 of 1974):

Provided that where the Central Government has given its approval to the appointment of a person convicted or detained under sub‑paragraph (a) or sub‑paragraph (b), as the case may be, no further approval of the Central‑Government shall be necessary for the subsequent appointment of that person if he had not been so convicted or detained subsequent to such approval;

Provided that where

(i) he has not completed the age of 25 years, but has attained the age of majority; or

(ii) he has attained the age of 70 years;

and where his appointment is approved by a special resolution passed by the company in general meeting, no further approval of the Central Government shall be necessary for such appointment.

(d) where he is a managerial person in more than one company he draws remuneration from one or more companies subject to the ceiling provided in section III of Part II;

(e) he is resident in India.

Explanation: For the purpose of this Schedule, resident in India includes a person who has been staying in India for a continuous period of not less than twelve months immediately preceding the date of his appointment as a managerial person and who has come to stay in India,

(i) for taking up employment in India, or

(ii) for carrying on a business or vocation in India.

PART II

RENIUNERATION

Section I.‑Remuneration payable by companies having profits

Subject to the provisions of section 198 and section 309, a company having profits in a financial year may pay any remuneration by way of salary, dearness allowance, perquisites, commission and other allowances, which shall not exceed five per cent of its net profits for one such managerial person, and if there is more than one such managerial person, ten per cent for all of them together.

Section II.‑ Remuneration payable by companies having no profits or inadequate profits

1. Notwithstanding anything contained in this Part, where in any financial year during the currency of tenure of the managerial person a company has no profits or its profits are inadequate, it may pay remuneration to a managerial person by way of salary, dearness allowance, perquisites and any other allowances,

(A) not exceeding ceiling limit of Rs. 24,00,000 per annum or Rs. 2,00,000 per month calculated on the following scale:

Where the effective capital of Company is‑	Monthly remuneration payable shall not exceed (Rupees)
(i) less than rupees 1 crore	75,000/
(ii) rupees 1 crore or more but less than rupees 5 crores	1,00,000/
(iii) rupees 5 crores or more but less than rupees 25 crores	1,25,000/
(iv) rupees 25 crores or more but less than rupees 50 crores	1,50,000/-
(v) rupees 50 crores or more but less than rupees 100 crores	1,75,000/
(vi) rupees 100 crores or more	2,00,000/

Provided that the ceiling limits specified under this sub‑paragraph shall apply, if

(i)payment of remuneration is approved by a resolution passed by the Remuneration Committee.

(ii)the company has not made any default in repayment of any of its debts (including public deposits) or debentures or interest payable thereon for a continuous period of thirty days in the preceding financial year before the date of appointment of such managerial person.

(B) not exceeding the ceiling limit of Rs. 48,00,000 per annum or Rs. 4,00,000 per month calculated on the following scale:

Where the effective capital of Company is‑	Monthly remuneration payable shall not exceed (Rupees)
(i) less than rupees 1 crore	1,50,000/
(ii) rupees 1 crore or more but less than rupees 5 crores	2,00,000/
(iii) rupees 5 crores or more but less than rupees 25 crores	2,50,000/
(iv) rupees 25 crores or more but less than rupees 50 crores	3,00,000/
(v) rupees 50 crores or more but less than rupees 100 crores	3,50,000/
(vi) rupees 100 crores or more	4,00,000/

Provided that the ceiling limits specified under this sub‑paragraph shall apply, if

(i) payment of remuneration is approved by a resolution passed by the Remuneration Committee.

(ii) the company has not made any default in repayment of any of its debts (including public deposits) or debentures or interest payable thereon for a continuous period of thirty days in the preceding financial year before the date of appointment of such managerial person.

(iii) a special resolution has been passed at the general meeting of the company for payment of remuneration for a period not exceeding three years;

(iv) a statement along with a notice calling the general meeting referred to in clause (iii) is given to the shareholders containing the following information, namely,

I. General Information:

(1) Nature of industry

(2) Date or expected date of commencement of commercial production

(3) In case of new companies, expected date of commencement of activities as per project approved by financial institutions appearing in the prospectus

(4) Financial performance based on given indicators

(5) Export performance and net foreign exchange collaborations

(6) Foreign investments or collaborators, if any.

II. Information about the appointee:

(1) Background details

(2) Past remuneration

(3) Recognition or awards

(4) Job profile and his suitability

(5) Remuneration proposed

(6) Comparative remuneration profile with respect to industry, size of the company, profile of the position and person (in case of expatriates the relevant details would be w.r.t. the country of his origin)

(7) Pecuniary relationship directly or indirectly with the company, or relationship with the managerial personnel, if any.

III. Other information:

(1) Reasons of loss or inadequate profits

(2) Steps taken or proposed to be taken for improvement

(3) Expected increase in productivity and profits in measurable terms.

IV. Disclosures :

(1) The shareholders of the company shall be informed of the remuneration package of the managerial person.

(2) The following disclosures shall be mentioned in the Board of Director's report under the heading "Corporate Governance", if any, attached to the annual report:

(i) All elements of remuneration package such as salary, benefits, bonuses, stock options, pension etc. of all the directors;

(ii) Details of fixed component and performance linked incentives along with the performance criteria;

(iii) Service contracts, notice period, severance fees;

(iv) Stock option details, if any, and whether the same has been issued at a discount as well as the period over which accrued and over which exercisable.

Where the effective capital of Company is‑	Monthly remuneration payable shall not exceed (Rupees)
(i) less than rupees 1 crore	1,50,000/
(ii) rupees 1 crore or more but less than rupees 5 crores	2,00,000/
(iii) rupees 5 crores or more but less than rupees 25 crores	2,50,000/
(iv) rupees 25 crores or more but less than rupees 50 crores	3,00,000/
(v) rupees 50 crores or more but less than rupees 100 crores	3,50,000/
(vi) rupees 100 crores or more	4,00,000/

Provided that the ceiling limits specified under this sub‑paragraph shall apply, if

(i) payment of remuneration is approved by a resolution passed by the Remuneration Committee.

(ii) the company has not made any default in repayment of any of its debts (including public deposits) or debentures or interest payable thereon for a continuous period of thirty days in the preceding financial year before the date of appointment of such managerial person.

(iii) a special resolution has been passed at the general meeting of the company for payment of remuneration for a period not exceeding three years;

(iv) a statement along with a notice calling the general meeting referred to in clause (iii) is given to the shareholders containing the following information, namely,

I. General Information:

(1) Nature of industry

(2) Date or expected date of commencement of commercial production

(3) In case of new companies, expected date of commencement of activities as per project approved by financial institutions appearing in the prospectus

(4) Financial performance based on given indicators

(5) Export performance and net foreign exchange collaborations

(6) Foreign investments or collaborators, if any.

II. Information about the appointee:

(1) Background details

(2) Past remuneration

(3) Recognition or awards

(4) Job profile and his suitability

(5) Remuneration proposed

(7) Pecuniary relationship directly or indirectly with the company, or relationship with the managerial personnel, if any.

III. Other information:

(1) Reasons of loss or inadequate profits

(2) Steps taken or proposed to be taken for improvement

(3) Expected increase in productivity and profits in measurable terms.

IV. Disclosures :

(1) The shareholders of the company shall be informed of the remuneration package of the managerial person

(2) The following disclosures shall be mentioned in the Board of director's report under the heading "Corporate Governance", if any, attached to the annual report:

(i) All elements of remuneration package such as salary, benefits, bonuses, stock options, pension etc. of all the directors;

(ii) Details of fixed component and performance linked incentives along with the performance criteria;

(iii) Service contracts, notice period, severance fees;

(iv) Stock option details, if any, and whether the same has been issued at a discount as well as the period over which accrued and over which exercisable.

Provided further that the conditions specified in sub‑paragraph (C) shall apply in the case the effective capital of the company is negative.

Provided also that the prior approval of the Central Government is obtained for payment of remuneration on the above scale.]

2. A managerial person shall also be eligible to the following perquisites which shall not be included in the computation of the ceiling on remuneration specified in paragraph 1 of this Section:

(a) contribution to provident fund, superannuation fund or annuity fund to the extent these either singly or put together are not taxable under the Income‑tax Act, 1961,

(b) gratuity payable at a rate not exceeding half a month's salary for each completed year of service, and

In addition to the perquisites specified in paragraph 2 of this Section, an expatriate managerial person (including a non‑resident Indian) shall be eligible to the following perquisites which shall not be included in the computation of the ceiling on remuneration specified in paragraph I of this Section:

(a) Children's education allowance.‑ In case of children studying in or outside India, an allowance limited to a maximum of Rs. 5,000/‑ per month per child or actual expenses incurred, whichever is less. Such allowance is admissible up to a maximum of two children.

(b) Holiday passage for children studying outside India/family staying abroad.‑ Return holiday passage once in a year by economy class or once in two years by first class to children and to the members of the family from the place of their study or stay' abroad to India if they are not residing in India with the managerial person.

(c) Leave travel concession.‑ Return passage for self and family in accordance with the rules specified by the company where it is proposed that the leave be spent in home country instead of anywhere in India.

Explanation I.‑For the purposes of Section II of this Part, 'effective capital' means the aggregate of the paid‑up share capital (excluding share application money or advances against shares); amount, if any, for the time being standing to the credit of share premium account; reserves and surplus (excluding revaluation reserve); long‑term' loans and deposits repayable after one year (excluding working capital loans, over‑drafts, interest during loans unless funded, bank guarantee etc., and other short‑term arrangements) as reduced by the aggregate of any investments (except in the case of investment by an investment company whose principal business is acquisition of shares, stock debentures or other securities), accumulated losses and preliminary expenses not written off.

Explanation II.‑(a) Where the appointment of the managerial person is made in the year in which company has been incorporated, the effective capital shall be calculated as on the date of such appointment;

(b) In any other case, the effective capital shall be calculated as on the last date of the financial year preceding the financial year in which the appointment of the managerial person is made.

Explanation III.‑For the purposes of Section II of this Part family means the spouse, dependent children and dependent parents of the managerial person.

Explanation IV.‑For the purposes of this section, "Remuneration Committee" means that a committee which consists of at least three non‑executive independent directors including nominee director or nominee directors, if any.

Explanation V.‑For the purposes of this clause, the Remuneration Committee while approving the remuneration under this section, shall,

(a) take into account, financial position of the company, trend in the industry, appointee's qualification, experience, past performance, past remuneration etc.

(b) be in a position to bring about objectivity in determining the remuneration package while striking a balance between the interest of the company and the shareholders.

Explanation VI.‑For the purposes of Paragraph 1, "negative effective capital" means the effective capital which is calculated‑.

(a) in accordance with the provisions contained in Explanation 1 of this Part;

(b) less than zero].

Section III‑Remuneration payable to a managerial person in two companies

Subject to the provisions of Sections I and II, a managerial person shall draw remuneration from one or both companies, provided that the total remuneration drawn from the companies does not exceed the higher maximum limit admissible from any one of the companies of which he is a managerial person.

PART III

PROVISIONS APPLICABLE TO PARTS I AND II OF THIS SCHEDULE

1. The appointment and remuneration referred to in Parts I and II of this Schedule shall be subject to approval by a resolution of the shareholders in general meeting.

2. The auditor or the secretary of the company or where the company has not appointed a secretary, a secretary in whole‑time practice shall certify that the requirements of this Schedule have been complied with and such certificate shall be incorporated in the return filed with the Registrar under sub‑section (2) of section 209.

Amendment to Schedule XIII w.e.f. 2‑3‑2000

IV. Managerial remuneration linked to effective capital of a company

Press Releases, dt. 6‑3‑2000.‑ The Central Government (Department of Company Affairs) has issued a notification No. GSR 215 (E), dt. 2‑3‑2000 allowing payment of remuneration of managerial personnel in the event of absence or inadequacy of net profits of the company, ranging between Rs. 75,000 and Rs. 2,00,000 per month depending upon the effective capital of the company.

The Notification No. GSR 215(E), dt. 2‑3‑2000 provides that where in any financial year during the currency of tenure of the managerial person a company has no profits or its profits are inadequate, it may pay remuneration to a managerial person by way of salary, dearness allowance, perquisites and any other allowance, not exceeding ceiling limit of Rs. 24,00,000 per annum or Rs. 2,00,000 per month. This will be calculated on the basis of the effective capital of a company being less than Rs. 1 crore at Rs. 75,000 monthly remuneration. If the effective capital of a company is Rs. 1 crore at Rs. 75,000 monthly remuneration. If the effective capital of a company is Rs. 1 crore or more but less than Rs. 5 crores then the monthly remuneration payable to managerial person will not exceed Rs. 1,00,000. In the case of effective capital of the company being Rs. 5 crores or more but less than Rs. 25 crores the monthly managerial remuneration shall not exceed Rs. 1,25,000. In the case of effective capital of a company being Rs. 25 crores or more but less than Rs. 100 crores the monthly managerial remuneration shall not exceed Rs. 1,50,000. In the case of effective capital of a company being Rs. 100 crores or more, the monthly managerial remuneration shall not exceed Rs. 2,00,000.

The Gazette notification has been issued under sub‑section (1) of section 641 of the Companies Act, 1956. The notification amends Schedule XIII (Part II, section II) of the Companies, 1956. [PIB Press Release, New Delhi, dated 6th March, 2000]

V. Application for payment of Managerial Remuneration under the provisions of the Companies Act, 1956

Circular I of 2000 dt. 23‑6‑2000.‑ It has come to the notice of the Government that some companies are making payment of remuneration to their Managerial personnels which is in excess of the ceillings prescribed in schedule XIII to the Companies Act, 1956, on their appointment/reappointment or by way of mid‑term increase in remuneration without seeking the approval of the Central Govt. Applications seeking the approval of the Central Govt. are also submitted after a considerable lapse of time. In some cases applications were submitted for waiver of excess remuneration after the managerial personnel had already resigned/left the country. It is necessary that application should be submitted to the Central Govt. soon after the date of appointment or revision of term of appointment.

2. It is, clarified that from financial year starting with 1‑4‑2000, the companies should adhere to th4e relevant provisions of the companies Act in the matter of payment of remuneration to the Managerial Personnels both in letter and spirit. If for any justifiable reasons it is proposed to pay remuneration in excess of schedule XIII, the matter should be timely resolved in the Board meeting. The Board resolution should clearly justify the increase giving sustainable adequate reasons for payment of remuneration in excess of the amount indicated in schedule XIII, The applications for Govt. approval should also be submitted well in time. No payment of remuneration in excess of the limit under schedule XIII should be made till the Govt. approval is received.

3. The Auditors of the Company who audit should ensure that remuneration to the Managerial personnel is not paid in excess of the limit under Schedule XIII without necessary approvals. The Company Secretary of the company should also play a constructive role in ensuring that the matters relating to Managerial remuneration are dealt with in the Company within the stipulated time frame.

4. This circular has been placed at the Web page of the Department of Company Affairs at the Internet Address http:/www.nic.in/dca. [Issued by the Ministry of Law, Justice and Company Affairs vide No. 14/5/2000‑CL VII; Circular No. 1/CL. VII of 2000, dated 23‑6‑2000].

Circular II, File No. 12/7/2000 CL.VII, dated 27‑12‑2000

Appointment of Managerial Personnel and payment of Managerial Remuneration in case of Companies having no profit or inadequate profit‑rationalization thereof.

Cases are coming to the Department of Company Affairs wherein public companies or private companies which are subsidiaries of public companies are submitting applications to the Department of Company Affairs for approval of the Central Government for appointment of and/or payment of remuneration to managerial personnel in excess of the limits prescribed in sections 269, 310, 311 & 387 and in terms of section 198(4) read with Schedule XIII to the Companies Act, 1956, which provides scales of remuneration (salary, dearness allowance, perquisites and any other allowance).

2. The scales of monthly remuneration prescribed in Para 1 of Section II of Part II of Schedule XIII have since been revised vide notification GSR No. 215(E), dated 02‑03‑2000. The revised scales are as under:

	Where the effective capital of The company is	Monthly remuneration payable shall not exceed
(i)	Less than Rs. I crore	Rs. 75,000
(ii)	Rs. 1 crore or more but less than Rs. 5 crores	Rs. 1,00,000
(iii)	Rs. 5 crores or more but less than Rs. 25 crores	Rs. 1,25,000
(iv)	Rs. 25 crores or more but less than Rs. 100 crores	Rs. 1,50,000
(v)	Rs. 100 crores or more	Rs. 2,00,000

3. Where a particular company intends to pay a remuneration higher than that prescribed in the Companies Act read with the necessary Schedule, an application may be made to the Department of Company Affairs giving in detail the justification along with a copy of the resolution passed by the Board/AGM as the case may be.

4. In order to reduce subjectivity and to bring in an element of greater transparency and objectivity, the Company which submits an application for a remuneration which is higher than the prescribed limit must take into consideration the following factors (detailed note on each as applicable be furnished) and give a detailed justification. The application for increase in the remuneration should not be submitted in a mechanical way.

(i) Reasons for loss/inadequacy of profit.

(ii) Steps taken to improve the performance of the company.

(iii) Financial health/performance of the Company as may be reflected by effective capital, Net worth, Turnover, Profit/loss, dividend declared, etc.

(iv) Naturelof industry‑high technology area, c&e sector, infrastructure field, etc.

(v) Export performance and net foreign exchange earned.

(vi) Performance of the Company in socio‑economic activities.

(vii) General performance of industry in the relevant sector.

(viii) Foreign Investment and foreign collaborations.

(ix) Expansion/Diversification/Modemisation/Technology upgradation.

(x) Qualification, experience, period of association and contribution of the proposed appointee.

(xi) Requirement of personal skill and challenges ahead.

(xii) Past remuneration of the proposed appointee.

(xiii) Creativity/innovativeness of the proposed appointee/company.

(xiv) Recognition/Award obtained by the proposed appointee/company.

(xv) The amount of remuneration proposed to be paid including salary, allowances, perquisites and whether it will have any effect on the overall financial health of the Company.

(xvi) Any other factors relevant to the proposal, which the company may like to bring to the notice of the Govt. justifying their proposal.

5. Deficiencies generally observed in respect of the applications on the above subject are listed below:

(i) Application fee is not paid in proper manner. Sometimes the Demand Draft is not for the full amount of application fee and sometimes the demand draft is not payable in favour of Pay & Accounts Officer, Department of Company Affairs, New Delhi as prescribed in rule 2 of the Companies (Fees for Application) Rules, 1961 as amended vide GSR No. 501 (E) dated 06.07.1999.

(ii) Application is not filled in properly and completely in respect of all the columns. If a column is left blank, the letters N.A. should be filled up implying ‘Not Applicable'.

(iii) Applications are submitted after remuneration in excess of Schedule XIII has already been paid to the managerial person.

(iv) Certified copies of Newspaper clippings of notices, in original, published in the Newspaper in English and in local Newspaper in local language as required in terms of section 640‑B of the Companies Act are not furnished.

(v) Certified copies of Directors' Report and audited accounts of the company for each of the last 5 financial years of the company are not enclosed.

(vi) In case of foreign collaboration, certified copy of the FIPB approval letter(s) is/are not furnished.

(vii) Remuneration drawn by the proposed appointee from the applicant company or from any other company during the past 3 years prior to the proposed date of appointment is not indicated in terms of monetary package.

(viii) Requirements of section 316(2)/(4) of the Companies Act are not followed where the proposal is for appointment as managerial person in two or more than two companies and resolution is not passed by all the companies concerned.

(ix) Estimated project cost and source of finance together with projected equity, position regarding growth in effective capital, projection of turnover and net profit as computed under section 198 of the Companies Act, 1956 for the next five years is not given as required in col. 4 of the application (Forms 25A & 26) in respect of new Companies.

(x) Figure of turnover, net profit as computed under section 198 of the Companies Act, as projected/unaudited for the year in which the application is made, is not given even if the application is made towards the end of Financial Year/after the end of Financial Year, unaudited figures of working results are not furnished.

(xi) In case of proposal for mid‑term increase for remaining period, it is not indicated how the requirement of section 269 (2) of the Companies Act, 1956 read with Parts I & II of Schedule XIII was met at the time of appointment of MD/WTD/Manager and how the mid‑term increase in remuneration is justified in terms of working results of the Company

(xii) Papers/documents attached with the application are not authenticated and seal of the company is not put on each paper.

6. Attention is also invited to Explanation to Section 198 of the Companies Act, 1956 which states that 'Remuneration' includes any expenditure incurred by the Company giving benefit to its directors/managers on items mentioned at (a) to (d) of the said Explanation i.e.

(i) In providing any rent free accommodation or any other benefit or amenity in respect of accommodation free of charge, to any of the persons specified in sub section (1).

(ii) In providing any other benefit or amenity free of charge or at a concessional rate to any of the persons aforesaid;

(iii) In respect of any obligation or service which but for such expenditure by the company, would have been incurred by any of the persons aforesaid; and

(iv) To effect any insurance on the life, or to provide any pension, annuity or gratuity for any of the persons aforesaid or his spouse or child.

The term 'Salary' under the provisions of the Income Tax Act has been defined to include all payments received by a person in employment and includes wages, fees, commission, perquisites, profits in lieu of or in addition to salary, advance salary, pension, gratuity, encashment of leave etc. Certain items of perquisites are, however, excluded, to the extent permissible for the purpose of payment of Income Tax as per Central Board of Direct Taxes Circular No. 781 [F. No. 275/192/99‑IT (B)] dated 5‑11‑99. It has been observed that companies sometimes indicate the value of perks stating that the same is as per Income Tax Act. This is not the correct position and value of perquisites included in the total remuneration under section 198 of the Companies Act, 1956 is to be indicated as per actual cost. Income, Tax liability as per CBDT Circular is to be indicated separately.

7. The applicant companies should, therefore, hereafter also ensure that the prescribed Forms are completely and properly filled in regard to all the details so that the applications submitted are complete and proper at the time of submission itself. This will result in quicker and faster disposal. In this regard a checklist is also enclosed to facilitate proper filing of the applications. It is hoped that with filing of complete application disposal would be quicker.

8. Copy of this Circular is also available at the Web Site of the Department of Company Affairs at the following address: http/www.nic.in/dca.

9. Please cooperate by furnishing all the above requirements to facilitate expeditious clearance of your proposal.

CHECK LIST

Please ensure before submitting the application that the following information/ documents have been famished:

(i) Proper application fee in the manner provided vide GSR No. 501 (E) dt. 6‑7‑99.

(ii) Copies of public notices in English and in local newspaper in local language.

(iii) Monetary value of each of the perquisites and allowances and total remuneration package (in the form of statement annexed) valued as per actual cost.

(iv) Appropriate and clear resolution in support of the proposal.

(v) In case of appointment as Managerial personnel in two or more companies, the manner in which compliance of section 316(2)/(4) has been made.

(vi) Reasons for loss/inadequacy of profit, steps taken to improve the financial performance and future projections.

(vii) Full & proper justification for proposed appointment/remuneration.

(viii) The manner in which compliance of section 269(2) of the Companies Act was met at the time of appointment/reappointment of the managerial person where mid‑term increase in remuneration is proposed.

(ix) Application for condo nation of delay under section 637B along with justification and requisite application fee where the application was not submitted within 90 days of date of appointment/reappointment.

(x) Monetary value of total remuneration in Rupees or Rupees equivalent drawn by the proposed appointee during last three years from the applicant company or any other company.

(xi) Copy of the Directors' Report and the audited accounts of the company for each of the last five financial years of the company.

(xii) Each column of the application is filled up.

(xiii) Copies of FIPB approvals, in case of foreign collaboration/investment.

(xiv) Each page of application and documents attached is authenticated under the seal of the applicant company.

STATEMENT OF REMUNERATION PROPOSED

In Rupees/Rupees equivalent per month

A. SALARY

Basic Salary

Bonus

Gratuity (Non taxable)

Contribution to Provident Fund (Non taxable)

Contribution to Superannuation fund/Annuity fund (Non taxable)

B. ALLOWANCES

Entertainment allowance

Special allowance

C. PERQUISITES

Accommodation

Gas/Electricity/Water expenses

Children education

Transport and driver

Leave Travel concession (Non taxable)

Medical reimbursement (Non taxable)

Insurance (a) Personal effect

(b) Medical (Non taxable)

Servant, mail, cook

Security

Telephone

Club fee

Total

Note 1 : Any other item(s), which the company wants to indicate, may be added in the appropriate group above.

Note 2 : As per Explanation given under section 198 of the Companies Act, 1956, the salary and perquisites included in the total remuneration should be valued as per actual cost.

Note 3 : Income tax liability be indicated on a separate sheet to be attached.

STATEMENT OF INCOME TAX LIABILITY W.R.T. REMUNERATION PROPOSAL

Rationalisation of appointment of managerial personnel and their remuneration in companies Press Release, dt. 22‑1‑2001

The Government, Department of Company Affairs (DCA) has issued orders rationalizing appointment of managerial personnel and payment of managerial remuneration in case of companies having no profit or inadequate profit. This follows cases coming up‑before the DCA wherein public companies or private companies which are subsidiaries of public companies are submitting applications for approval of the Central Government for appointment of managerial personnel and payment of remuneration to them in excess of the limits prescribed in sections 269, 310, 311 and 387 and in terms of section 198(4) read with Schedule XIII of the Companies Act, 1956, which provides scales of remuneration to such personnel.

The revised scales of monthly remuneration for managerial personnel with effect from March 2, 2000 has been Rs. 75,000 per month for company with an effective capital of Rs. 1 crore, Rs. 1 lakh for companies with effective capital of more than one crore and less than Rs. 5 crores. Rs. 1.25 lakhs for companies with an effective capital of Rs. 5 crore or more but less than Rs. 25 crores Rs. 1.50 lakhs for companies with an effective capital of Rs. 25 crores or more but less than Rs. 100 crores and Rs. 2 lakh for companies with an effective capital of Rs. 100 crores or more.

Where a particular company intends to pay a remuneration higher than that prescribed in the Companies Act read with the necessary Schedule, an application may be made to the DCA giving in detail the justification alongwith a copy of the resolution passed by the Board (Annual General Meeting) as the case may be. To reduce subjectivity and to bring in an element of greater transparency and objectivity, the company which submits an application for a remuneration which is higher than the prescribed limit must take into consideration all relevant factors and give a detailed justification. The application for increase in the remuneration should not be submitted in a mechanical way. The DCA has also pointed out deficiencies generally observed in applications. The order also invites attention to explanation to Section 198 of the Companies Act, 1956, which states that "Remuneration" includes any expenditure incurred by the company giving benefit to its directors/managers. The applicant companies should, therefore, hereafter also ensure that the prescribed forms are completely and properly filled in regard to all the details so that the applications submitted are complete and proper at the time of submission itself. This will result in quicker and faster disposal. In this regard a checklist has been provided to facilitate proper filing of the applications. It is hoped that with filing of a complete application disposal would be quicker. [Press Release of PIB, dt. 22‑1‑2001].