Companies (Appointment and Remuneration of Managerial Personnel) Amendment Rules, 2016

     

The Companies (Appointment and Remuneration of Managerial Personnel) Amendment Rules, 2016

The Ministry of Corporate Affairs vide its notification dated 30th June, 2016 amended the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 and made the following amendments:

v   in rule 3, the expression "Chief Executive Officer (CEO), Company Secretary and Chief Financial Officer (CFO)" shall be omitted.

Amended Rule 3 (in track mode):

3. Filing of return of appointment.- A company shall file a return of appointment of a Managing Director, Whole Time Director or Manager, Chief Executive Officer (CEO), Company Secretary and Chief Financial Officer (CFO) within sixty days of the appointment, with the Registrar in Form No. MR.1 along with such fee as may be specified for this purpose.

v      in rule 5 of the principal rules,-

in sub-rule (1), "clauses (v), (vi), (vii) and (ix) to (xi)" shall be omitted.

Amended rule 5(1) (in track mode):

5. Disclosure in Board's report.-(1) Every listed company shall disclose in the Board's report-

(i)  the ratio of the remuneration of each director to the median remuneration of the employees of the company for the financial year;

(ii)  the percentage increase in remuneration of each director, Chief Financial Officer, Chief Executive Officer, Company Secretary or Manager, if any, in the financial year;

(iii)  the percentage increase in the median remuneration of employees in the financial year;

(iv)    the number of permanent employees on the rolls of company;

(v)  the explanation on the relationship bctwccn average increase in remuneration and company performance

(vi) comparison of the remuneration of Key Managerial Person against thc performance of the company,

(vii) variations in the market capitalisation of thc company, price earnings ratio as at the closing date of the current financial year and previous financial year and company in comparison to the rate at which the company came out VI ith the last public offer in case of listed companies, and in case of unlisted companies, the variations in the net worth of the company as at the close of the current financial  year and previous financial year;

(viii) average percentile increase already made in the salaries of employees other than the managerial personnel in the last financial year and its comparison with the percentile increase in the managerial remuneration and justification thereof and point out if there are any exceptional circumstances for increase in the managerial remuneration;

(ix)  comparison of the each remuneration of the Key Managerial Personnel against  the performance of the company;

(x)   the key parameters for any variable      component of remuneration availed by
the directors;

(xi)  the ratio of the remuneration of the highest paid director to that of the employees who are not directors but receive remuneration in excess of the highest paid director during the year; and

(xii)  affirmation that the remuneration is as per the remuneration policy of the company.

Explanation.- For the purposes of this rule.- (i) the expression "median" means the numerical value separating the higher half of a population from the lower half and the median of a finite list of numbers may be found by arranging all the observations from lowest value to highest value and picking the middle one;

(ii) if there is an even number of observations, the median shall be the average of the two middle values.

in sub-rule (2),-

1.  for the words the name of every employee of the company, who-", the words the names of the top ten employees in terms of remuneration drawn and the name of every employee, who^, shall be substituted;

2.   in sub-clause (i) for the words "sixty lakh rupees", the words "one crore and two lakh rupees" shall be substituted;

3.  in sub-clause (ii) for the words "five lakh rupees per month", the words " eight lakh and fifty thousand rupees per month" shall be substituted;

Amended rule 5(2) (in track mode):

5(2) The board's report shall include a statement showing the name of every employee of the company, who the names of the top ten employees in terms of remuneration drawn and the name of every employee, who--

(i)      if employed throughout the financial year, was in receipt of remuneration for that year which, in the aggregate, was not less than sixty lakh one crore and two lakh rupees;

(ii)     if employed for a part of the financial year, was in receipt of remuneration for any part of that year, at a rate which, in the aggregate, was not less than five lakh  rupees per month eight lakh and fifty thousand rupees per month;

(iii)  if employed throughout the financial year or part thereof, was in receipt of remuneration in that year which, in the aggregate, or as the case may be, at a rate which, in the aggregate, is in excess of that drawn by the managing director or whole-time director or manager and holds by himself or along with his spouse and dependent children, not less than two percent of the equity shares of the company.

❖ Form MR-1 has been substituted with revised form.

The MCA notification is available on the website of the MCA at the link http://www.mca.gov.in/Ministry/pdf/AmendmentRules_01072016.pdf

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