Managerial Remuneration

Managerial remuneration:

• Top level management like director and manager is known as managerial  person.

• Salary,bonus,commission And other benefits (other than director’s fee) is known as remuneration.

• Such remuneration give by company to his managerial person is known as managerial remuneration.

Maximum managerial remuneration:

• Maximum limit of remuneration payable by company to his managerial person, is known as maximum managerial remuneration.
• This provision does not apply on private company

• Remuneration give within limits required permission of remuneration committee

• If is given by more than maximum limits then permission of central government is required to obtain.

•  For the purpose of calculation of maximum remuneration ,company classified into two categories:

1)    Company having adequacy of profits
2)   Company having inadequate profits or incurring loss.

·      Calculation of maximum managerial remuneration in case of adequate profits:

1). For whole time director (WTD) -:

• If only 1 WTD -: (5% OF PROFIT)

• If > 1 WTD -: (10%OF PROFITT)

2). For Part time Director (PTD) -:

• If no WTD in Company -: (3% of Profit)
• If WTD also exist in Company -: ( 1% OF PROFIT)

                Overall max. 11% of Profit.

NOTES -:

1.  Managing director will be considered as whole time director of the company.
2.   Here profits means profit calculated u/s 349 & 350 of the company act.which is calculated in following manner:

·      Following income all other revenue & income shall be included in calculation Of profits.

     i. Capital nature profit on sale of fixed assets :

a.     Excessive part of sale value over cost of fixed assets is known as capital profit on sale of fixed assets.

b.     Profit by sale of fixed assets up to a cost as known as revenue nature profit.

ii. Revenue profit is considered in cal. Whereas capital profit will not be    considered.
iii. Balance of share forfeited after reissue of share.
iv. Balance of security premium account.
v. Any other capital nature profit excluding subsidy from government.

·       Except following expenses& losses all other expenses & losses need to be deducted In calculation of profit:

1. Managerial remuneration provided in books (director fee is deducted).
2. Income tax & wealth tax (VAT , Service Tax, Excise Duty, Custom Duty) is deducted.
3. Depreciation provided in books (Depreciation as per schedule 14) is deducted.
4.  Proposed dividend.
5.  Transfer to reserve.
6.   Intangible & fictitious assets written off.
7.  Compensation damages or claim paid voluntary (If given due to contract) then deducted.
8. Excess provision for expenses.

·      if depreciation as per schedule 14 is not given separately , then it will be assumed equal to depreciation as per rule.

 Calculation of maximum managerial remuneration in case of    inadequacy of profits or company incurring losses:-

 Effective table maximum monthly Remuneration without special resolution*

Less 1 crore	75000
1 crore or more but less than 5 crores	100000
5 crores or more but less than 25 crore	125000
25 crores or more but less than 50 crores	150000
50 crores or more but less than 100 crores	175000
100 crores or more but less than	200000

  * Double the max. monthly RemUNERETION If special resolution is passed.

N.B:-

1.)Effective capital includes:

Paid up equity share capital (excluding app. money received pending  allotment)

+ Paid up pref. share capital          (“ “ “ “ “ “)

+ Reserve & surplus

+ Debentures

+ Long term loans

+ Other long term debts(excluding loan taken for working capital        requirements for example: cash credit limit)

Less -: Fictitious assets

Less -: Non trade investments

                =Effective capital

2.) In absence of information investment is prepared as non-trade investment.