Skip to main content

MCA makes hiring of C-suite easier for companies

Early stage companies that are yet to see significant profit and loss-making companies looking to turnaround will now have more elbow room to hire star CEOs. The Ministry of Corporate Affairs (MCA) has significantly relaxed a company law provision that capped the remuneration payable to top managers. Earlier, it had also eased the rules governing disclosure requirements under the law.
The ministry recently amended Section II of Part-II of the Schedule V of the Companies Act, 2013. The section deals with the monetary limits for remuneration that can be paid to the managerial personnel without central government approval. These limits were specific to companies that had no profit or inadequate profit.
By way of this amendment, the ministry has effectively doubled the remuneration payable without prior approval of government across different categories based on paid-up capital. In further relief to pure-play professionals who are neither related to promoters nor have any other form of ownership the government has done away with the cap altogether. Earlier, any remuneration in excess of 2.5 per cent of the current year’s profit would have required the approval of the central government.
Such a professional should not have any direct or indirect interest or be related to the directors or promoters of the company or its holding company or any of its subsidiaries at any time during the last two years before or on or after the date of appointment and possess graduate level qualification with expertise and specialised knowledge in the field in which the company operates.
An exemption has also been made for shares acquired under ESOP (employee stock option plan) up to a certain threshold. The notification said that “any employee of a company holding shares of the company not exceeding 0.5 per cent of its paid up share capital under any scheme formulated for allotment of shares to such employees including Employees Stock Option Plan or by way of qualification shall be deemed to be a person not having any interest in the capital of the company.” “This was a long pending issue of great discomfort for the corporate sector. If you want to revive a sick company you need extraordinary talent. If you want to hire such extraordinary talent, the compensation has to be appropriate. The limits prescribed did not take into account ground realities,” said Pavan Kumar Vijay, managing director, Corporate Professionals.
Vijay said the government move would help in the revival of industrial sectors some of which are seeing cyclical downturns. He added that the move would also put an end to certain questionable practices companies had to undertake to circumvent the earlier provisions in order to retain talent.
Earlier, in July this year the MCA had amended the Rule 5 (2) of Managerial Remuneration Rules, 2014. The Board Report of such listed companies required disclosure of all employees receiving remuneration not less than ~60 lakh for a financial year and those working for part of the financial year and receiving remuneration not less than ~5 lakh per month.
The Amended Managerial Remuneration Rules, 2016 have enlarged the aforesaid monetary limit of remuneration to ~1.02 crore, while the per month limit has been enhanced to Rs.8.5 lakh. However, under all circumstances, the Amended Managerial Remuneration Rules, 2016 require a listed company to include the name of the top ten employees in terms of the remuneration drawn in its Board Report.
“In view of the economic growth of the country and the aforesaid enhancement of the monetary limits in terms of the remuneration drawn by the employees of a company, MCA has acknowledged increase in remuneration of employees of such companies and thereby raised the benchmark for reporting requirements in the Board Report of the concerned companies,” law firm Rajani Associates said in a note.
Business Standard New Delhi,24th October 2016

Comments

Popular posts from this blog

New income tax slab and rates for new tax regime FY 2023-24 (AY 2024-25) announced in Budget 2023

  Basic exemption limit has been hiked to Rs.3 lakh from Rs 2.5 currently under the new income tax regime in Budget 2023. Further, the income tax slabs in the new tax regime has been changed. According to the announcement, 5 income tax slabs will be there in FY 2023-24, from 6 income tax slabs currently. A rebate under Section 87A has been enhanced under the new tax regime; from the current income level of Rs.5 lakh to Rs.7 lakh. Thus, individuals opting for the new income tax regime and having an income up to Rs.7 lakh will not pay any taxes   The income tax slabs under the new income tax regime will now be as follows: Rs 0 to Rs 3 lakh - 0% tax rate Rs 3 lakh to 6 lakh - 5% Rs 6 lakh to 9 lakh - 10% Rs 9 lakh to Rs 12 lakh - 15% Rs 12 lakh to Rs 15 lakh - 20% Above Rs 15 lakh - 30%   The revised Income tax slabs under new tax regime for FY 2023-24 (AY 2024-25)   Income tax slabs under new tax regime Income tax rates under new tax regime O to Rs 3 lakh 0 Rs 3 lakh to Rs 6 lakh 5% Rs 6

Jaitley plans to cut MSME tax rate to 25%

Income tax for companies with annual turnover up to ?50 crore has been reduced to 25% from 30% in order to make Micro, Small and Medium Enterprises (MSME) companies more viable and also to encourage firms to migrate to a company format. This move will benefit 96% or 6.67 lakh of the 6.94 lakh companies filing returns of lower taxation and make MSME sector more competitive as compared with large companies. However, bigger firms have shown their disappointment since the proposal for reducing tax rates was to make Indian firms competitive globally and it is the large firms that are competing globally. The Finance Minister foregone revenue estimate of Rs 7,200 crore per annum for this for this measure. Besides, the Finance Minister refrained from removing or reducing Minimum Alternate Tax (MAT), a popular demand from India Inc., but provided a higher period of 15 years for carry forward of future credit claims, instead of the existing 10-year period. “It is not practical to rem

Don't forget to verify your income tax return in August: Here's the process

  An ITR return needs to be verified within 120 days of filing of tax return. Now that you have filed your income tax return, remember to verify it because your return filing process is not complete unless you do so. The CBDT has reduced the time limit of ITR verification to 30 days (from 120 days) from the date of return submission. The new rule is applicable for the returns filed online on or after 1st August 2022. E-verification is the most convenient and instant method for verifying your ITR. However, if you prefer not to e-verify, you have the option to verify it by sending a physical copy of the ITR-V. Taxpayers who filed returns by July 31, 2023 but forget to verify their tax returns, will get the following email from the tax department, as per ClearTax. If your ITR is not verified within 30 days of e-filing, it will be considered invalid, and may be liable to pay a Late Fee. Aadhaar OTP | EVC through bank account | EVC through Demat account | Sending duly signed ITR-V through s