Loss-making cos can now pay remuneration to non-executive directors

Loss-making companies can now pay remuneration to their non-executive directors, including independent directors

Topics

board of directors | Centre

Loss-making companies can now pay remuneration to their non-executive directors, including independent directors, with the government amending existing rules.

Amendments have been made to certain provisions under the Companies Act, 2013.

Now, non-executive directors of companies having no profit or inadequate profit can be given remuneration subject to certain conditions.

The remuneration limits will be one-fifth of the total amount that can be given to managerial persons or executive directors, according to a notification issued by the corporate affairs ministry.

The latest move will help loss-making companies and those with inadequate profits to pay remuneration to non-executive directors, including independent directors. Till now, non-executive directors of such companies were not allowed to receive any remuneration except sitting fee and this was also making it difficult for them to attract talent, a senior official said.

For companies having negative effective capital or less than Rs 5 crore effective capital, the annual remuneration limit for non-executive directors is Rs 12 lakh. For such companies’ executive directors, the limit will be Rs 60 lakh, the notification said.

In the case of companies with effective capital of Rs 5 crore and above but less than Rs 100 crore, the non-executive directors’ annual remuneration limit is Rs 17 lakh.

The limit is Rs 84 lakh for executive directors.

The limit of yearly remuneration for non-executive directors at companies with effective capital of Rs 100 crore and above but lower than Rs 250 crore is Rs 24 lakh, as per the notification issued on Thursday.

Executive directors’ compensation limit is Rs 120 lakh (or Rs 1.2 crore).

For companies with an effective of Rs 250 crore or more, the annual remuneration limit for non-executive directors is “Rs 24 lakh plus 0.01 per cent of the effective capital in excess of Rs 250 crore”.

According to the notification, such a limit is Rs 120 lakh plus 0.01 per cent of the effective capital in excess of Rs 250 crore for executive directors.

For paying any amount beyond the specified limits, the companies concerned need to get respective shareholders’ approval.

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

Dear Reader,


Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.


We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor