Loss-Making Firms Can Now Pay Remuneration To Non-Executive Directors
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% of the effective capital in excess of Rs 250 crore".
According to the notification, such a limit is Rs 120 lakh plus 0.01% 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.