Procedure for Fixation of Remuneration to Managing Director/Whole Time Director

 Procedure for Fixation of Remuneration to Managing Director/Whole Time Director
The procedure to be followed for fixation of remuneration of Managing Director/Whole Time Director is as follows:

   1. Convene a Board meeting after giving notices to all the directors of company in accordance with Section 173, to fix the date, time, place and agenda of the General Meeting to pass an ordinary or special resolution for fixing the remuneration of Managing Director.
   2. Send the notice in writing atleast twenty-one days before the date of General Meeting.
   3. Hold the general meeting and pass the ordinary or special resolution as the case may be.
    4. If special resolution has been passed, then file Form MGT 14 along with explanatory statement with the Registrar of Companies within thirty days.
5.    Send three copies of the notices and copy of the proceedings of the General Meeting to the Stock Exchange(s), if the shares of company are listed.
6. If the remuneration fixed in the meeting, is more than stipulated under Section 197 read with Schedule V to the Act, The application should be filed electronically in MR 2 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 accompanied by the prescribed fees. Details of proposal needs to be entered along with certain attachments as given below:
i.  Copy of the calculation sheet of effective capital;
ii. copy(ies) of Board Resolutions;
i.  Copy of resolution of Nomination and Remuneration Committee along with its composition and certificate by the nomination committee that the remuneration is as per remuneration policy of the company;
ii.     copy of share holders resolution;
iii.certificate form auditor or company secretary of the company or company secretary in practice with regard to compliance of Section 196;
iv.   Certificate of no default in repayment of debts for continuous period of thirty days in the preceding financial year from a director or company secretary of the company;
v.   No objection certificate from the financial institutions or banks to whom the company has defaulted;
vi.   copy of scheme of approval by the Tribunal for the revival of the company;
vii.  Copy of Draft agreement between the company and the proposed appointee;
viii.Newspaper clipping of notices published under section 201
ix.   Copy of visa or passport in case the proposed appointee is foreign national;
x.     Copies of education or professional qualification certificate;
xii.  Statement as per item (iv) of 3rd proviso of Section II of Part II of Schedule V of the Companies Act, 2013
xiii.Statement as per item (iv) of third proviso of section II of Part II of Schedule V to the Companies Act, 2013
xiv.Projections of the Turnover and net profits for next three years;
xv.  Calculation of estimated profit under section 198 of the Act;
xvi.An application under Section 460 of the Act for condonation of delay;
xvii.Full and proper justification in favour of the proposal along with bio-data of the appointee;
xviii.Documentary proof regarding compliance of the provisions of Section 196 of the Companies Act, 2013 at the time of appointment/ re-appointment of the proposed appointee;
xix.Certificate by the secretary of the company or CA/CS in whole time practice to be notified erstwhile;
xx.  Details, if applicant company is a subsidiary of listed company;
xxi.Certificate from CA/CS in whole time practice along with calculation of excess remuneration paid to the appointee;
7. Execute the agreement, as approved by the Board and Central Government (where applicable), with the managing director.
8. Make necessary entries in the register of directors etc. and other records and registers of the company.
9.     File the following documents with the ROC:
A.    The company should file with the ROC return of appointment of the managingdirector in Form MR -1, within sixty days as per Section 196(4) of the appointment and the return must be certified by the auditors of the company or the company secretary or a secretary in whole-time practice.
The Mandatory attachments for Form MR – 1:
       Copy of Board Resolution,
      Copy of Shareholders Resolution
       Copy of letter of consent to act as managing director
       Copy of Central Government Approval
      Copy of certificate by nomination and remuneration committee
B.   Form DIR – 12 for particular of appointment of a key managerial personnel, within thirty days of the appointment.
C.     Form MGT 14 for special resolution within thirty days of the appointment.
10. In case of listed company, submit to the stock exchanges, proceedings of the general meeting. Inform stock exchanges about remuneration immediately.
11.  Inform all concerned about the appointment of the managing director. It is advisable to issue a general notice in newspapers about the appointment of the managing director.
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