Procedure for Fixation of Remuneration to Managing Director/Whole Time Director
The procedure to
be followed for fixation of remuneration of Managing Director/Whole Time Director is as follows:
1. Convene a Board meeting
after giving notices
to all the directors of company in accordance with Section
173, to fix the date,
time, place and agenda of the General
Meeting to pass
an ordinary or special resolution for fixing the remuneration of Managing Director.
2. Send the notice in writing atleast
twenty-one days before the date of General
Meeting.
3. Hold the general meeting
and pass the ordinary or special resolution as the case may be.
4. If special
resolution has been passed, then file Form MGT – 14 along with explanatory statement with the Registrar of Companies within
thirty days.
5. Send
three copies of the notices and copy of the proceedings of the General Meeting
to the Stock Exchange(s), if the shares of company are listed.
6. If the remuneration fixed
in the meeting, is more than stipulated under Section 197 read with Schedule
V to
the Act, The application should
be filed electronically in MR – 2 of the Companies
(Appointment and Remuneration of Managerial Personnel) Rules 2014 accompanied by the prescribed fees. Details of proposal
needs to be entered along with certain
attachments as given below:
i. Copy of the calculation sheet of effective
capital;
ii. copy(ies) of Board Resolutions;
iii. Copy of
resolution of Nomination and Remuneration Committee along with its composition and certificate by the nomination committee that the remuneration is as per remuneration policy
of the company;
iv. copy of share
holders resolution;
v.certificate form
auditor or company secretary of the company or company secretary in practice
with regard to compliance of Section 196;
vi. Certificate of no – default in repayment
of debts for continuous period of thirty
days in the preceding financial year from a director or company secretary of the company;
vii. No objection certificate from the
financial institutions or banks to whom the
company has defaulted;
vii. copy of scheme of approval by the Tribunal
for the revival
of the company;
viii. Copy of Draft agreement between the company
and the proposed
appointee;
ix.Newspaper clipping
of notices published
under section 201
x. Copy of visa or passport in case the proposed appointee is foreign national;
xi. Copies of education or professional qualification certificate;
xii. Statement as per
item (iv) of 3rd
proviso of Section II of Part II of Schedule V of the Companies Act, 2013
xiii.Statement as per item (iv) of third proviso
of section II of Part II of Schedule V to the Companies
Act, 2013
xiv.Projections of the Turnover
and net profits for next three years;
xv. Calculation of estimated profit
under section 198 of the Act;
xvi.An application under Section 460 of the Act for condonation of delay;
xvii.Full and proper justification in favour of the proposal
along with bio-data
of the appointee;
xviii.Documentary proof
regarding compliance of the provisions of Section 196 of the Companies Act, 2013 at the time of appointment/ re-appointment of the proposed appointee;
xix.Certificate by the secretary of the company
or CA/CS in whole
time practice to be notified erstwhile;
xx. Details, if applicant company
is a subsidiary of listed
company;
xxi.Certificate from CA/CS in whole time practice along
with calculation of excess remuneration paid to the appointee;
7. Execute the agreement, as approved by the Board and Central
Government (where applicable), with the managing director.
8. Make necessary
entries in the register of directors etc. and other records and registers of the company.
9. File the following documents with the ROC:
A. The company
should file with the ROC return of appointment of the managingdirector in Form MR -1, within sixty days as per Section
196(4) of the appointment and the return must be certified by the auditors of the company
or the company secretary or a secretary in whole-time practice.
The
Mandatory attachments for Form MR – 1:
•
Copy
of Board Resolution,
•
Copy
of Shareholders Resolution
•
Copy of letter of consent to act as managing director
•
Copy of Central Government Approval
•
Copy of certificate by nomination and remuneration committee
B. Form
DIR – 12 for particular of appointment of a key managerial personnel, within
thirty days of the appointment.
C.
Form MGT – 14 for special
resolution within thirty
days of the appointment.
10. In case of
listed company, submit to the stock
exchanges, proceedings of the general meeting. Inform stock exchanges
about remuneration immediately.
11. Inform
all concerned about the appointment of the managing director. It is advisable
to issue a general notice in newspapers about the appointment of the managing
director.
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