Appointment and Remuneration of Managers
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Questions and Answers

What is the main purpose of Section 200 in terms of managerial remuneration?

  • To eliminate all managerial remuneration in loss-making companies
  • To increase the remuneration of managers irrespective of company performance
  • To allow companies to set remuneration limits within statutory ceilings even when profits are inadequate (correct)
  • To require mandatory government approval for all remuneration changes

    • Which of the following factors should a company consider when fixing managerial remuneration?

  • The company's market share
  • The financial position of the company (correct)
  • The age of the individual concerned
  • The personal preferences of board members

    • Under what circumstances can a company fix managerial remuneration without government approval?

  • If profits are consistent year on year
  • If executive positions are decreasing
  • If the company has undergone a merger
  • If the company has inadequate or no profits (correct)

    • What kind of performance related matters does Rule 6 consider while fixing remuneration?

    <p>The financial and operating performance over the last three years</p> Signup and view all the answers

    How should remuneration be ideally compared within a company?

    <p>By using a rating methodology that assesses director remuneration proportionately</p> Signup and view all the answers

    What is the role of professional qualifications in determining managerial remuneration?

    <p>It is one of the factors to be taken into account</p> Signup and view all the answers

    Which of the following statements is true regarding the relationship between remuneration and performance?

    <p>There should be a consideration of the relationship for remuneration fixing</p> Signup and view all the answers

    What does Section 197 govern in relation to managerial personnel?

    <p>The appointment and remuneration of managerial personnel</p> Signup and view all the answers

    What is required of an individual to be considered without interest in the capital of the company?

    <p>They must have no direct or indirect interest related to the company's directors.</p> Signup and view all the answers

    Which educational qualification is needed to meet the criteria for directorship?

    <p>Graduate level qualification</p> Signup and view all the answers

    What is the maximum percentage of shares an employee can hold without being deemed to have an interest in the company's capital?

    <p>0.5%</p> Signup and view all the answers

    What condition must be met before a company can approve the payment of remuneration?

    <p>No defaults in payments to banks or creditors.</p> Signup and view all the answers

    What type of resolutions must be passed for remuneration payment approval?

    <p>Either an ordinary or special resolution depending on the remuneration type.</p> Signup and view all the answers

    What is the maximum sitting fee that a director may receive per meeting as per the rules?

    <p>100,000 rupees</p> Signup and view all the answers

    What is the maximum duration for which remuneration can be approved at a general meeting?

    <p>Three years</p> Signup and view all the answers

    Which category of directors must receive at least the same sitting fee as other directors?

    <p>Independent Directors</p> Signup and view all the answers

    What must accompany the notice calling for a general meeting regarding remuneration?

    <p>Statement containing specific information about remuneration</p> Signup and view all the answers

    According to Section 197, sitting fees are...

    <p>exclusive of the amounts mentioned under Section 197(1)</p> Signup and view all the answers

    In case of default in payment, what must a company obtain before approval for remuneration?

    <p>Approval from the concerned bank or creditor</p> Signup and view all the answers

    What is the minimum sitting fee a listed company proposed for its independent directors?

    <p>45,000 rupees</p> Signup and view all the answers

    What may vary in directors' sitting fees under the prescribed rules?

    <p>The class of the company</p> Signup and view all the answers

    Which of the following is true regarding the payment of sitting fees to directors?

    <p>Sitting fees cannot exceed the remuneration prescribed based on company class.</p> Signup and view all the answers

    If a company decides to increase the sitting fee for its directors, what remains a requirement?

    <p>The increase must not exceed the prescribed limits.</p> Signup and view all the answers

    In the case of different fees for various classes of companies, what does Section 197(5) allow?

    <p>Different fees for independent directors</p> Signup and view all the answers

    Which title is associated with an officer of a company designated as the Chief Executive Officer?

    <p>Chief Executive Officer</p> Signup and view all the answers

    What is the role of a Company Secretary in a company as per the Companies Act, 2013?

    <p>To perform functions as defined under the Companies Act</p> Signup and view all the answers

    What does the term 'maximum managerial remuneration' refer to?

    <p>The total compensation allowed for managerial roles</p> Signup and view all the answers

    Which position does NOT fall under the category of Key Managerial Personnel (KMP)?

    <p>Shareholder</p> Signup and view all the answers

    In the event of absence or inadequacy of profits, how is managerial remuneration typically handled?

    <p>It is calculated at a lower rate</p> Signup and view all the answers

    What does 'compensation for loss of office' pertain to?

    <p>Severance package for departing Managers</p> Signup and view all the answers

    What is defined as a 'Company Secretary in practice'?

    <p>A company secretary recognized as practicing under specific laws</p> Signup and view all the answers

    Which of the following positions is explicitly NOT mentioned as a managerial personnel title?

    <p>Lead Technician</p> Signup and view all the answers

    Under what circumstances can the Chairperson be appointed as Managing Director or CEO?

    <p>When the company's articles permit it.</p> Signup and view all the answers

    Which class of companies is exempted from the prohibition mentioned in Section 203(1)?

    <p>Companies with multiple businesses and appropriate leadership.</p> Signup and view all the answers

    What is a requirement for the appointment of whole-time key managerial personnel?

    <p>It must be documented in a board resolution.</p> Signup and view all the answers

    What is the limitation on holding office for whole-time key managerial personnel in multiple companies?

    <p>They can hold office in one company and its subsidiaries only.</p> Signup and view all the answers

    What happens if a key managerial personnel holds office in more than one company at the time of the Act's commencement?

    <p>They must choose one company to remain in office within six months.</p> Signup and view all the answers

    What is the significance of the latest audited balance sheet for companies?

    <p>It is critical for defining class status for managerial appointments.</p> Signup and view all the answers

    What should a board resolution include regarding the appointment of whole-time key managerial personnel?

    <p>The terms and conditions including remuneration</p> Signup and view all the answers

    What does the second proviso to Section 203(1) imply concerning managerial personnel?

    <p>It allows for flexibility in appointing managerial personnel if certain conditions are met.</p> Signup and view all the answers

    What does 'effective capital' exclude from its calculation?

    <p>Revaluation reserve</p> Signup and view all the answers

    When calculating effective capital for a newly appointed managerial person, what date is used?

    <p>Date of the managerial person's appointment</p> Signup and view all the answers

    Which types of loans are excluded from the effective capital calculation?

    <p>Working capital loans</p> Signup and view all the answers

    In what scenario can a managerial person receive remuneration according to item (A)?

    <p>If they have no interest in company capital</p> Signup and view all the answers

    What happens if a managerial person's appointment is for less than one year?

    <p>Remuneration is pro-rated</p> Signup and view all the answers

    Which of the following is not included in the effective capital calculation?

    <p>Interest due on loans</p> Signup and view all the answers

    What is meant by 'statutory structure' in the context of effective capital?

    <p>An entity entitled to hold shares</p> Signup and view all the answers

    Which of the following components contributes positively to effective capital?

    <p>Long-term deposits</p> Signup and view all the answers

    Study Notes

    Appointment and Remuneration of Managerial Personnel

    • Learning Outcomes: Students will be able to describe provisions for appointing Managing Directors, Whole-Time Directors, and Managers, explain Key Managerial Personnel (KMP) appointments, understand maximum managerial remuneration concepts, compute remuneration, explain compensation for loss of office, and explain Company Secretary functions and secretarial audits.

    Meaning of Certain Terms

    • Chief Executive Officer (CEO): An officer designated by a company.
    • Chief Financial Officer (CFO): A person appointed as the CFO of a company.
    • Company Secretary: A company secretary appointed by a company to perform company secretary functions under the Companies Act, 1980.
    • Company Secretary in practice: A company secretary deemed to be in practice under the Company Secretaries Act, 1980.
    • Key Managerial Personnel (KMP): The Chief Executive Officer, managing director, manager, company secretary, whole-time director, CFO, and other officers designated by the Board.
    • Manager: An individual managing the whole or substantial whole of a company's affairs, including directors.

    Appointment and Remuneration of Managerial Personnel

    • Managing Director: A director entrusted with substantial management powers by articles, agreement, resolution, or Board. This does not include routine administrative duties.
    • Whole Time Director (WTD): A director employed full-time by the company to manage the company's affairs.
    • Appointment of MD/WTD/Manager: A company should not appoint a manager if a managing director is already appointed, and vice-versa. No company can appoint both a managing director and a manager.
    • Tenure: No company can appoint or re-appoint a managing director, whole-time director, or manager for more than five years at a time, and no re-appointment can occur earlier than one year before the expiry of the prior term.
    • Eligibility Conditions: A person appointed as KMPs should not be disqualified as a director, be at least 21, and not yet 70 years old, and cannot be an undischarged insolvent. Special resolution is required for those above 70 years of age.

    Appointment of Key Managerial Personnel (KMPs)

    • Listed and other public companies: Listed companies and public companies with paid-up share capital over 10 crores are required to have whole time KMPs
    • Prohibition on individual holding positions: No single individual can be both Chairman and Managing Director or CEO in the same company.
    • Exemptions: This prohibition doesn't apply to companies in multiple business operations.

    Conditions for Appointment

    • Board Resolution: Every whole-time key managerial personnel must be appointed by a Board resolution.
    • Multiple appointments: A whole-time key managerial personnel cannot hold office in more than one company at the same time (except subsidiaries).
    • Government approval: If there's a variance between the appointment and the conditions in Schedule V, Central Government approval is required.
    • Residence: The person appointed must be a resident of India with continuous stay of 12 months before the appointment.

    Functions of a Company Secretary

    • Reporting: Report to the Board regarding adherence to Companies Act and other relevant regulations.
    • Guidance: Offer guidance to directors on their responsibilities and powers.
    • Meetings: Facilitate meetings, maintain minutes, and obtain required approvals.
    • Compliance: Ensure the company adheres to applicable secretarial standards, and relevant corporate governance standards
    • Representation: Represent the company before various statutory bodies.
    • Assistance: Assist the Board in its corporate governance activities.
    • Other duties: Carry out other roles assigned by the board.

    Remuneration Limit

    • Companies with profits: Companies with profits can fix managerial remuneration, which may be a set amount or a percentage of profits, as deemed fit, within statutory limits.
    • Companies without profits: Companies without profits or those with inadequate profits are constrained to specific limits given in Schedule V.

    Recovery of Managerial Remuneration

    • Restated financial statements: If financial statements have to be restated due to non-compliance or fraud, excess remuneration paid to managerial personnel may be recovered.

    Managerial Remuneration in the absence or inadequacy of profits

    • Managerial remuneration is capped depending on whether a company has profits or not. Specific amounts per type of company are in Schedule V, Part III.
    • Exemptions: Companies exempted from these restrictions.

    Secretarial Audit

    • Bigger companies: Listed as well as public companies with specific turnover or capital thresholds are required to have a secretarial audit.
    • Secretarial Audit Responsibility: The company secretary is responsible for the audit of the company's secretarial and related records.
    • Penalty for default: Penalties may apply to the company, and/or individual company personnel if the reporting requirements are not met.

    Compensation for Loss of Office

    • Compensation amounts: Compensation is calculated based on the average of the director's remuneration during the three preceding years or the shorter period that the person has held the office.
    • Exclusion: No compensation if the company is winding up.

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    Appointment and Remuneration of Managerial Personnel PDF

    Description

    This quiz covers the key aspects of appointing managerial personnel, including Managing Directors and Company Secretaries. Students will learn about managerial remuneration, the roles of Key Managerial Personnel (KMP), and the provisions under the Companies Act. Prepare to demonstrate your understanding of these concepts and their applications in corporate governance.

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