Companies to adhere to relevant provisions of Companies Act in matter of payment of managerial remuneration in excess of ceiling prescribed in Schedule XIII to Companies Act - Companies Law - CIRCULAR NO. 1/CL-VII OF 2000,

CIRCULAR NO. 1/CL-VII OF 2000, DATED 23-6-2000, ISSUED BY THE DEPARTMENT OF COMPANY AFFAIRS Subject:- Companies to adhere to relevant provisions of Companies Act in matter of payment of managerial remuneration in excess of ceiling prescribed in Schedule XIII to Companies Act 1. It has come to the notice of the Government that some companies are making payment of remuneration to their managerial personnel which is in excess of the ceilings prescribed in Schedule XIII to the Companies Act, 1956, on their appointment/re-appointment or by way of mid-term increase in remuneration without seeking the approval of the Central Government. Applications seeking the approval of the Central Government 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 Government soon after the date of appointment or revision of term of appointment. 2. It is, clarified that from financial year starting with 1st April, 2000, the companies should adhere to the relevant provisions of the Companies Act in the matter of payment of remuneration to the managerial personnel 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 III. The applications for Government 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 Government 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.