Last updated: December 17th, 2019 3:44 PM

Managerial Remuneration - Director's Salary as per Companies Act

As per the Companies Act, 2013, Managerial Person means a managing director, whole-time director or manager of a company incorporated in India. Managerial renumeration includes pay, compensation, or reward for work which is earned by a managerial person. Companies Act, 2013 has certain restrictions on pay of Managerial Renumeration. In this article, we look at such restrictions.

Applicability

Private limited and public limited companies are both required to comply with the regulations pertaining to payment of managerial renumeration. Hence, its important for any person becoming a Director of a company to be aware of Managerial Renumeration, as per Companies Act, 2013.

Managerial Renumeration

Managerial renumeration includes pay, compensation or reward for work provided to a managerial person. The following types of expenditure incurred by a company are also termed as managerial renumeration.

• Expenditure incurred by the company in providing rent free accommodation, or any other benefit or amenity, free of charge, to any of the company's director and manager.
• Expenditure incurred by the company in providing any other benefit or amenity free of charge or at a concessional rate to any of the company's director or manager.
• Expenditure incurred by the company in respect of any obligation or service, which, but for such expenditure by the company, would have been incurred by any of the company's director or manager.
• Expenditure incurred by the company to effect any insurance on the life of, or to provide any pension, annuity or gratuity for, any of the company's director and manager or his/her spouse and/or child.
• Expenditure incurred by the company on behalf of its managerial person for indemnifying them against any liability in respect of any negligence, default, misfeasance, breach of duty or breach of trust for which they maybe guilty in relation to the company and if such person is proved to be guilty, the premium paid on such insurance would be treated as part of its renumeration.
• Expenditure incurred by the company for maintenance of vehicles pertaining to personal use by director or manager.

Managerial Renumeration - Company Having Profit

A company can pay any renumeration by way of salary, dearness allowance, perquisites, commission and other allowances not exceeding 5% of its net profit for one managerial person. If there are more than one managerial person, then managerial renumeration cannot exceed 10% of net profit for all of the managerial persons together.