Section 197 of CA 2013 : Section 197: Overall Maximum Managerial Remuneration And Managerial Remuneration In Case Of Absence Or Inadequacy Of Profits

CA 2013

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Explanation using Example

Imagine a public company named "Tech Innovations Ltd." has a Managing Director (MD), two Whole-time Directors (WTDs), and four Non-executive Directors (NEDs). For the financial year 2023, the company reports net profits of ₹100 million. The company's Board proposes the following remuneration:

  • MD: ₹8 million
  • Each WTD: ₹4 million
  • Each NED: ₹1 million

According to Section 197 of the Companies Act, 2013, the total managerial remuneration cannot exceed 11% of the net profits, which in this case is ₹11 million.

The proposed remuneration for the MD and WTDs alone add...

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