CHAPTER XIII
APPOINTMENT AND REMUNERATION OF
MANAGERIAL PERSONNEL
OF
THE COMPANIES ACT, 2013
In the series of
Comparative Analysis on the Companies Act, 2013 with the Companies Act, 1956
second chapter in the series is Chapter XIII: APPOINTMENT AND REMUNERATION OF
MANAGERIAL PERSONNEL
Section 196, the
Companies Act, 2013: Appointment of Managing Director, Whole Time Director or
Manager:
Corresponding sections of the Companies
Act, 1956: section 197A,267,317, 384,385,388
Ø
The
new act says that the re-appointment shall not be earlier than 1 year before
expiry of his term, in old act it was 2 years.
Ø
The
minimum age mentioned in new act for a person to be appointed as MD is 21 years
as per old act it was 25 years.
Ø
The
terms and conditions of appointment of MD shall be approved by the Board and by
the shareholders in ensuing general meeting.
Ø
Return
for appointment shall be filed with ROC with 60 days, earlier it was 90 days.
Section 197, the
Companies Act, 2013: Overall maximum managerial remuneration and managerial
remuneration in case of absence or inadequacy of profits:
Corresponding sections of the Companies
Act, 1956: section 198, 201, 309, 310 & 387
Ø
As
per new act independent directors shall not be entitled for any stock option,
in old act independent director was not defined and as per ESOP guidelines an
independent director could receive stock options.
Ø As per new act the Board Report
shall disclose the ratio of remuneration of each director to the median
employee’s remuneration and such other details as may be prescribed.
Ø
Persons
contravening provisions of this section shall be punishable with penalty for an
amount not less than Rs. 100,000 but which may extend to Rs. 500,000.
Section 198, the
Companies Act, 2013: Calculation of profit
Corresponding
sections of the Companies Act, 1956: section 349.
Ø In addition to the provisions of
old act the new act says that at the time of calculation of profit any changes
in carrying amount of an asset or liability recognized in equity reserves
including surplus in profit and loss account on measurement of the asset or the
liability at fair value shall not be recognised.
Section 199, the
Companies Act, 2013: Recovery of remuneration in certain cases:
Corresponding
sections of the Companies Act, 1956: None
Ø
This
is a newly introduced section which states that in case of re-statement of
financial statements of a company due to fraud or non-compliance, shall recover
from the MD/Manager/WTD/CEO the remuneration paid in excess of the applicable
provisions or which should actually had been paid in compliance with re-stated
statements.
Section 200, the
Companies Act, 2013: Central Government or company to fix limit with regard to
remuneration:
Corresponding
sections of the Companies Act, 1956: section 637AA
Ø
Earlier
the power to fix remuneration was given to only Central Government now the Company
and Central Government any can fix the remuneration.
Section 201, the
Companies Act, 2013: Forms of and procedure in relation to, certain
applications:
Corresponding
sections of the Companies Act, 1956: section 640B
Ø
Same
provisions.
Section 202, the
Companies Act, 2013: Compensation for loss of office of managing or whole time
director or manager:
Corresponding
sections of the Companies Act, 1956: section 318
Ø
Same
provisions.
Section 203, the
Companies Act, 2013: Appointment of key managerial personnel:
Corresponding
sections of the Companies Act, 1956: section 269, 316 & 386.
Ø The
new section says such class of companies as may be prescribed shall appoint the
KMP, and that class is yet to be prescribed as the rules has not yet been
approved. As per definition of new act KMP also include CEO, CFO and CS.
Ø The
new section says that the same individual shall not be appointed as the
Chairperson and MD/CEO of the company unless the articles of the company
otherwise provides or the company does not carry multiple business.
Ø As
per new section every KMP shall be appointed by means of a Board Resolution and
this resolution shall also include the terms/ conditions of the appointment and
remuneration payable.
Ø The
vacancy of any KMP shall be filled within 6 months of such vacancy caused.
Ø For
contravention of any provision of this section the company shall be liable for
a minimum penalty of Rs. 100,000 which can be fined upto Rs. 500,000 and every
KMP in default shall be fined upto Rs. 50,000,
Rs. 1000 per day can be charged where the default be of continuing nature.
Section 204, the
Companies Act, 2013: Secretarial audit for bigger companies:
Corresponding
sections of the Companies Act, 1956: None
Ø
This is a newly introduced section which
states that every listed company and such other class of company as may be prescribed
shall annex with it’s Board Report a Secretarial Audit Report provided by a
company secretary in practice. The report shall also explain in full the
qualifications or observations made in the secretarial audit report.
Ø
Penalty
for contravention of this section can be imposed from Rs. 100,000 to Rs.
500,000.
Section 205, the
Companies Act, 2013: Functions of company secretary
Corresponding
sections of the Companies Act, 1956: None
Ø
This is a new section which mention the
functions to be performed by company secretary which mainly includes ensuring
compliance of applicable provisions and applicable secretarial standards.
~ By
Nikita Singh~
The
information given in this blog is the personal understanding of the writer and
shall not be used as a conclusive material. The content stated/mentioned here
is subject to changes by respective government/authorities in the applicable
laws. The writer shall not be liable for any direct or indirect damages caused
to any person acting solely on/based upon the information provided herein.
