This document outlines the procedures for appointing and setting remuneration for managerial personnel under the Companies Act 2013. Key points include: managerial positions are limited to 5-year terms; qualifications like age and criminal history disqualify candidates; board approval and shareholder ratification are required for appointments; and maximum remuneration is capped at 11% of net profits, with exceptions to pay more subject to approvals. Public companies must also disclose managerial pay ratios and increases in their board reports.

1. Appointment and Remuneration of
Managerial Personnel
COMPANIES ACT 2013
BY VENKATESH

2. APPOINTMENT OF MD, WTD & MANAGER
SEC 196 (1) (2)
 No Company shall employ at the same time a MD
and Manger.
 No person shall appoint or Re – appoint for a
term exceeding 5 years as MD or Whole Time
Director or Manager.
 Provided no Re – appointment shall be made
earlier than one year before the expiry of the
present term.

3. DISQUALIFICATIONS FOR APPOINTMENT
SEC 196 (3)
 The Persons below the age of 21 years and
above the age of 70 years are not eligible. (Exp)
 An Un discharged Insolvent.
 The Persons who suspended payment to his
Creditors or Makers at any time.
 Convicted by a Court of law of an offence and
sentenced for a period of more than 6 months.

4. PROCEDURE FOR APPOINTMENT
SEC 196 (4) (5)
 All terms & conditions and Remuneration
payable them has to be approved by Board of
directors.
 The above appointment has to be approved by
next General meeting.
 If the appointment is not approved in the
general meeting any acts done by him before
approval shall not deemed to be invalid.
 With in 6 months from the appointment of MD or
WTD or CEO or CS or CFO, file a Return of Form
MR.1 along with prescribed fee.

5. OTHER CONDITIONS FOR APPOINTMENT
OF KMP SEC.203
 Every listed company and public company having a paid
up capital of 10 crore or more shall appoint –
MD/CEO/Manager, CS, CFO.
 No person can act as KMP at the same time in more than
one company but act as Director in other co. with the
approval of board. (Exp.)
 If the office of KMP is vacated, fill up the vacancy with in 6
months from the date of vacation of that position.
 If any company contravenes the provisions of this Sec.-
shall be punishable with fine which shall not less than 1
lakh but which may extend to 5 Lakhs and every person
in default shall be liable to a fine which may extend to
50,000 and Rs.1000 for every day till the default
continues.

6. MAXIMUM REMUNERATION PAYABLE TO
MANAGERIAL PERSONNEL
 The total remuneration payable by a Public company,
to its Directors including MD,WTD and its manager shall
not exceed 11% of net profit of that FY.
 Provided that the company in general meeting with the
approval of CG may authorise the payment of
remuneration exceeding 11% of net profits.
 Provided further that,
- The maximum remuneration payable to one MD or
manager shall not exceed 5%.
- If more than one MD or manager the remuneration
shall not exceed 10%.
o In case of other directors,
- shall not exceed 1% if MD or manager are there.
- shall not exceed 3% if MD or manager are NOT there.
 The above percentages are exclusive of Sitting Fee
payable to them.

7. REMUNERATION IN CASE OF LOSS OR
INADEQUATE PROFITS
 Not with standing any thing contained in this act – the
shall not pay any remuneration to its directors including
MD or Manager, but subject to schedule V. (exp.)
 The above payment shall not include sitting fee and
payment towards its services rendered based on his
professional capacity.
 Provided that no Independent Director shall not hold any
option and eligible to get sitting fee & reimbursement of
expenses and profit related commission approved in the
general meeting.
 If any person contravenes the provisions of this Sec.-
shall be punishable with fine which shall not less than 1
lakh but which may extend to 5 Lakhs.

8. OTHER RELATED TOPICS
 Sec. 198 – computation of profits.
 Sec. 199 – Recovery of remuneration in certain
cases.
 Sec. 200 – Central Government or Company fix
limits with regard to remuneration.
 Sec. 201 – Forms of and procedure in relation
to, certain Applications.
 Sec. 202 – Compensation for loss of office of
MD/WTD/Manager.
 Details about employee drawing more salary
than directors and discloser in the board of
directors report.

9. DISCLOSURE IN THE BOARD OF
DIRECTORS REPORT
 The listed shall disclose in the Board’s report - the
ratio of remuneration of each director to the median
remuneration of the employees of the company.
 The % increase in the remuneration of each key
managerial personnel in that FY.
 Comparison of key managerial personnel against the
company’s performance.
 The key parameters for any variable component of
remuneration payable to them.
 The % increase in the remuneration of key
managerial personnel against the % increase in the
remuneration of employees of the company.
 Details about the employee who is not a director but
drawing more than director’s remuneration (exp).

10. APPOINTMENT OF COMPANY SECRETARY
& SECRETARIAL AUDIT
 Every company having paid up capital 5 crore or more
has to appoint whole time company secretary.
 Evert listed co. and co. having 50 crore or more paid up
capital or having turnover of 250 crores or more has to
disclose secretarial audit report along with its board of
directors report .
 If any qualification is given by CS in the secretarial audit
report , the BOD have to give an explanation to the
qualification.
 If the Co. or CS contravenes the provisions of this Sec.-
shall be punishable with fine which shall not less than 1
lakh but which may extend to 5 Lakhs.

11. FUNCTIONS & DUTIES OF COMPANY SECRETARY
 To report to the board about compliance of provisions of
this act and rules and other related laws.
 To ensure the compliance and application of secretarial
standards issued by ICSI.
 To give guidance to directors in discharging their duties
& responsibilities .
 In conducting & attending the meetings & maintaining the
minutes of the meeting.( Board/ Committee/GM).
 To represent before various regulators and other
authorities to discharge duties under this Act.
 To assist & advice the directors in Co. affairs & in
implementing good corporate governance &
 To discharge such other duties as specified under this
Act.

12. FORMS RELATED TO THIS TOPICS
 E-Form MR – 1 : Return for Appointment of KMP.
 E-Form MR – 2 : Form of application to CG
where the company is going to pay the excess
remuneration specified in this sections.
 P-Form MR – 3 : Secretarial Audit Report.