1. A PPOINTMENT & R EMUNERATION OF M ANAGERIAL P ERSONNEL 13 th March, 2015 By CA P V N P Sharma +91 99083 64410 pvnp.sarma@hytechseed.in CS Vasudeva Rao Devaki +91 9989345999 dvrao@dvraoassociates.com

2. Managerial Personnel Appointment 2

3. DEFINITIONS: Sec 2(53) “Manager” – Same as CA 1956 – Same as before. means an individual who, subject to the superintendence, control and direction of the Board of Directors, has the management of the whole, or substantially the whole, of the affairs of a company, and includes a director or any other person occupying the position of a manager, by whatever name called, whether under a contract of service or not; 3

4. DEFINITIONS: Sec 2(54) “Managing Director” means a director who, by virtue of the Articles of a Company or an agreement with the company or a resolution passed in its general meeting, or by its Board of Directors, is entrusted with substantial powers of management of the affairs of the company and includes a director occupying the position of managing director, by whatever name called. Under CA 1956, MD can be appointed through MOA, which is not allowed in NCA. Under CA 1956, “Powers which would not otherwise exercisable by him was also included”, which now removed. 4

5. DEFINITIONS  Sec 2 (52) “Listed Company ” means a company which has any of its securities listed on any recognized stock exchange.  Sec 2 (81 ) “securities” means the securities as defined in clause (h ) of section 2 of the Securities Contracts (Regulation) Act, 1956; Points for Discussion: MD has to be a Director for his appointment; whereas Manager or WTD inclusive def (could be director or any other person)?????  Sec 2 (94) “Whole-time Director” includes a Director in the whole- time employment of the company;  Under CA 1956, WTD was not defined. 5

6. Definitions  Sec 2 (53) – Manager  Sec 2 (54) – MD  Sec 2 (94) - WTD  Sec 196 – Appt. of MD / WTD or Manager  Companies (Appt and Remuneration) Rules, 2014  Part I of Schedule V Managerial Personnel – Appointment Applicable Sections/Rules 6

7.  This Section is applicable to both Public & Private Company.  A Company can appoint either Managing Director or Manager but not both at a time.  Term shall not exceed five years at a time.  Re-appointment can be done before the term expires, which however shall not be earlier than one year of current term expiry. (under CA 1956, it was 2 Years).  What is the effective date of Appointment in such cases?? APPOINTMENT – SECTION 196 7

8. Disqualifications – Under Sec 196 Age shall be above 21 Years, but not above 69 Years Under CA 1956, it was 25 years (Schedule XIII) In case of above 69 years, Shareholders consent by Special Resolution Un-discharged insolvent or has at any time been adjudged as an insolvent; Has at any time suspended payment to his creditors or makes, or has at any time made, a composition with them; or Has at any time been convicted by a Court of an offence and sentenced for a period of more than six months. 8

9. Disqualifications – Points for Discussion Under CA 1956, Convicted Offence should involve moral turpitude, which is not required under CA 2013 Under NCA, sentence shall be exceeding 6 months, which was not the case under CA 1956. Therefore, office convicted for less than 6 Months, is eligible for appointment. Under the CA 1956, for Manager, these disqualification, occurred during preceding 5 years are relevant, which is not the case now. Whether Section 164 applicable to Manager and Whole time Director ???? 9

10. Definition of Court – Sec 2 (29 ) The High Court having jurisdiction in relation to the place at which the registered office of the company concerned is situate, except to the extent to which jurisdiction has been conferred on any district court or district courts subordinate to that High Court under sub-clause; The district court, in cases where the Central Government has, by notification, empowered any district court to exercise all or any of the jurisdictions conferred upon the High Court, within the scope of its jurisdiction in respect of a company whose registered office is situate in the district; The Court of Session having jurisdiction to try any offence under this Act or under any previous Company Law; The Special Court established under section 435; Any Metropolitan Magistrate or a Judicial Magistrate of the First Class having jurisdiction to try any offence under this Act or under any previous company law; 10

11. + Is the person restrained to become MD / WTD / Manager, if he has been convicted by the any other High Court, other than the High Court of the state in which Regd. Office is situated ?? 1 If the answer to the above point is NO, then if the Registered Office of the Company shifted to the state in which he was convicted. What is the sanctity of his position or his appointment ?? 2 Points for Discussion 11

12. PART- I OF SCHEDULE- V – CONDITIONS  The Conditions are almost same as was there before, except the following:  In addition to the 15 specified Acts The Prevention of Money – Laundering Act, 2002 is added.  He is Resident of India. a)For taking up employment in India; or b) For carrying on a business or vacation in India 12

13. Imp Points Board & General Meeting Notice shall include: Terms and Conditions of such Appointment Remuneration payable Interests of other Directors in such appointment, and Other Matters Additional Compliance –Listed Companies  Send 6 Copies of the notices to SE.  Submit the proceedings of GM to SE 13

14. PROCESS OF APPOINTMENT Consent Letter from the Appointee Declaration from the Appointee that he Satisfies all the conditions of Part I Schedule V Declaration from Appointee he is eligible to be MD / WTD / Manager Remuneration and Compensation Committee should recommend to the Board about the Terms and Condition of such appointment Board Resolution for the Appt. and also to the Terms and Condition of such Appointment 14

15. PROCESS OF APPOINTMENT Filing of Forms with ROC, Form MGT-14 (in case of MD) – 30 days Form MGT-14 (in case KMP provisions applies) - 30 days MR-1 – Return of Appointment (No Approval Route) – 60 days DIR-12 – Change of Designation of the appointee – 30 days MR-2 – Application to CG (Approval Route) – 90 days Shareholders Consent for the Appointment File MGT-14 (Post AGM/EGM) – 30 days Update Register of Directors 15

16. Managerial Personnel – Remuneration 16

17. Managerial Personnel – Remuneration Applicable Provisions  Sec 2 (78) - Definition of Remuneration  Sec 197 - Overall Maximum Remuneration  Sec 198 - Calculation of profits  Sec 199 - Recovery of Remuneration  Sec 200 - Central Government Powers  Companies (Appt. and Remuneration) Rules, 2014  Part II of Schedule V 17

18.  For purpose of Schedule V it also include reimbursement of any direct taxes to the managerial person.  Under CA 1956, there was no clarity, in case of No Profits or in adequate Profits, whether they are entitle for Commission, but now it is very broad. It is looks like, he is entitle for commission, provided it is within the limits.  From the definition it infers that any kind of cost to the company incurred on his behalf is covered under Remuneration.  It includes money transferred to third party on his behalf. REMUNERATION [Sec. 2(78)]  Means any money or its equivalent given or passed to any person for services rendered by him and includes perquisites as defined under the Income –Tax Act, 1961 (43 of 1961). 18

19. Not exceeding 11% of net profit of the company Total managerial remuneration payable by a public company in a financial year To MD / WTD or ManagerTo other directors If there is one MD or WTD or Manager If there is more than one MD or WTD or Manager Maximum 5% of net profit Maximum 10% of net profit When there is no MD or WTD or Manager When there is MD or WTD or Manager Maximum 3% of net profit Maximum 1% of net profit 19

20. + When Company wants to pay remuneration exceeding 5% or 10%, as the case may be, is considered is a situation of inadequate profits. Is it correct?? 1 In case of no profit or inadequate profit, then it should be in accordance with Schedule V OR 2 With Previous Approval of Central Government, if the proposed remuneration is beyond Part II of Schedule V Limits. [Sec.197(11)] 3 Points to be Noted 20

21. Calculation of Net Profit- Section 198  Net Profit for Sec 197 shall be computed as per method given in Sec 198. Note: Previously in CA, 1956 there was no provision regarding “any change in carrying amount of an asset or of a liability recognized in equity reserve including surplus in profit and loss account on measurement of the asset or the liability at fair value”, But now such amounts should not be taken into consideration, while calculating the net profits. 21

22. Application to CG 22

23. A PPLICATION T O CG – S EC 201  Applicable to all Listed Companies or Subsidiary of Listed Company, who fail to comply Schedule V conditions  Applicable to un-Listed Companies, if fail to comply with the conditions specified in Rule Number 7 of Chapter XIII.  Please note that the disqualifications specified in Section 196 are Prohibitary, therefore, even CG has no power to waive, But same is not the case for the conditions specified in Part I of Schedule V  Application shall be made within 90 days of Appointment.  Other documents as sought in the Form MR-2 23

24. A DDITIONAL I NFORMATION – CG A PPLICATION Additional Information to be provided to Central Government for obtaining their consent either for Appointment or Remuneration (Section 200) The financial position of the company; The remuneration or commission drawn by the individual concerned in any other capacity; The remuneration or commission drawn by him from any other company; Professional qualifications and experience of the individual concerned; Such other matters as may be prescribed. 24

25. A DDITIONAL I NFORMATION – CG A PPLICATION The CG or Company shall have regard to the following matters., namely:  the financial and operating performance of the company in last preceding 3 years.  Relationship b/w remuneration and performance.  The principle of proportionality of remuneration, by a rating methodology compare remuneration of directors to that of other directors and employees or executives.  If any differences is there between remuneration policy for directors and other employees, then explanation for same.  Securities held by directors, including option and details of share pledged at the end of preceding FY. 25

26. A PPLICATION T O CG – S EC 201 POINTS TO BE NOTED:  The Application shall be made within 90 days of Appt. (i.e., from the date of Board Meeting), however Shareholders Resolution details is a mandatory attachment for MR-2. Therefore, Company is forced to file MR-2 only after the Shareholders Approval.  Further the Filing Fee for MR-2 is Rs. 20,000/- 26

27. U NLISTED C OMPANIES – E XEMPTIONS I N THE EVENT OF NO PROFIT OR INADEQUATE PROFIT 1)Now Unlisted Companies can pay Remuneration without CG Approval, beyond ceiling specified in Section II, Part II of Schedule V, subject to the following conditions :- i.Remuneration is approved by the Board and Remuneration Committee, if applicable, ii.The shareholders Special Resolution for a period of 3 years; iii.Clear reason and justification for payment of remuneration beyond the said limit shall be recorded; 27

28. U NLISTED C OMPANIES – E XEMPTIONS I N THE EVENT OF NO PROFIT OR INADEQUATE PROFIT i.The Company not made any default for a continuous period of 30 days in the preceding FY before the date of payment;  Repayment of any of its debts (including Public Deposits) or debentures or interest thereon  Repayment of preference shares and dividend thereon ii.Necessary disclosures in the Explanatory Statement including reasons and justification for payment of remuneration beyond the said limit; iii.The company has filed Balance Sheet and Annual Return which are due to be filed. 28

29. PART - II SECTION - III OF SCHEDULE - V : IN CASE OF INADEQUATE OR NO PROFIT In these cases, the company may pay remuneration in excess of Section ii, Provided: a)Excess Limit is paid by any Other Company and that other company is either:  A Foreign Company or  Other Company, which got the its Shareholders approval and  It should treats this excess amount as part of Managerial Remuneration of its Company for the purpose of Section 197. b)Newly Incorporated Company, for a period of 7 Years from the DOI, or c)The Sick Company for five years from Sanction of scheme of revival, subject to compliance of specified conditions in Schedule V O THER EXEMPTED COMPANIES 29

30. SEZ A PPOINTMENT a)Resident in India Condition does not applicable for SEZ Companies. Therefore, even a Foreigner, who does not have employment visa can be appointed as Managerial Personnel. REMUNERATION: a)An unlisted SEZ Company can pay upto Rs. 2.40 Crores (PA) without CG Approval, Subject to the conditions specified 30

31.  Now any Company can pay Sitting Fees upto Rs. 1.00 Lakh per meeting.  This sitting Fee provisions are applicable for both Board or Committee Meetings.  Act is indirectly restricting the Company to pay Sitting Fee beyond Rs. 1.00 Lakh, as CG Approval requirement no more available. Since it is covered in the rules, which can be modified by the MCA as and when needed.  Listing Agreement is silent about amount of Sitting Fee  The Sitting Fees is not part of the Maximum Managerial Remuneration of 11% of Net Profits (Sec.197). SITTING FEES 31

32.  Sitting fees to ID & WD shall not be less than the Sitting Fee payable to other Directors. [Rule 4 of Chapter Companies Appointment and Remuneration rules 2014]  Different Sitting Fee for different Classes of Companies shall be as may be prescribed. However, there is no specific rule to define the Class of Companies. Therefore, the presumption as of now is that any Company can pay Sitting Fee, as they decides, but upto a maximum of Rs. 1.00 Lakh) (Sec 197 (5))  Directors attending through VC is entitled to Sitting Fee ??? SITTING FEES 32

33.  Remuneration for services rendered by Director in a capacity other than as Director will not fall under the limits prescribed, provided, in the opinion of the Nomination and remuneration committee and Board of Director, the Director posses the qualification for the practice of that other Profession. Remuneration For Services Rendered In Professional Capacity [Sec 197(4)] 33

34. W HAT COMES UNDER P ROFESSION Following person are considered to be professionals as per the various cases decided (Source Ramaiya)  a journalist.  an editor of a magazine but does not include publisher/proprietor.  an author.  an engineer.  a man of letters writing numerous articles.  a film actor.  an optician.  a commission agent.  an auctioneer, valuer or an estate agent. In addition to above an architect, solicitor, stock broker, CA & advocate will also come under professionals. 34

35. Remuneration For Services Rendered In Professional Capacity [Sec 197(4)]  Now the requirement of CG approval is not required.  However, the remuneration for other services are subject to the compliance of Sec 188.  Necessary Disclosure in Board Report is must. 35

36. Remuneration For Services Rendered In Professional Capacity [Sec 197(4)]  As per Sec. 177(4)(iv), approval of the Audit Committee is must even though it is at arm’s length and in the ordinary course of business.  Entry in the register of contracts under Sec. 189 will be required to be entered, unless the value of transaction is less than Rs. 5 Lakhs. 36

37. Restrictions on Remuneration to Professional Directors of Listed Companies  In case of No Profits or Inadequate Profits, even Listed Company can now pay only up to 5% of its Net Profits (2.5% + 2.5%), to its professional Managerial Personnel.  Earlier MCA has given exemption for LC effective from 14 th July 2011, which is now withdrawn.  Therefore, now approval of CG required is must, if the remuneration is excess of the aforesaid Limits even for Professional Directors. 37

38. + When a Managerial Personnel is otherwise entitle for 5% of Net-profits, how this provision will really benefit or can it put more stringent conditions for professional Directors??? 1 Inadequate Profits means????. 2 Points for Discussion 38

39. Remuneration to Independent Directors ELIGIBLE:  He is entitled for Sitting Fee.  He is entitled for Commission (only Annual). INELIGIBLE:  He is not entitled for any ESOP - Sec 149(9) & 197(7).  Any other monetary gain 39

40. + Since SEBI (Share Based Employee Benefits) Regulation Guidelines, 2014, prohibits ESOP to ID w.e.f 01/10/2014, whereas the Companies Act has come into force 1 st April 2014, In such circumstances, Can a Listed Company grant ESOP to ID, during 1 st April 2014 to 30 th September 2014?? 1 What is status of ESOP Granted before 31 st March 2014 to ID, but vested and/or exercised after 1 st April 2014?? 2 Points for Discussion 40

41.  Director who is not a Independent Director [Sec.197(7)]  Director who does not belong to Promoter or Promoter Group or his Family.  Director who does not hold either directly or indirectly more than 10% of outstanding Equity Shares of the company. Points for Discussion:  While calculating 10% holding of Directors, should we include relatives holding or not?? Who are the Director eligible for ESOP?? 41

42.  Applicable to Listed Companies.  Now Disclosure of Remuneration in the Board’s Report is must. Insurance Premium [Sec197(13)]  Insurance Premium amount is not part of the Remuneration. However, if such person found guilty, then shall be treated as part of their remuneration.  Note :NO such provision was there in CA, 1956 DISCLOSURE REQUIREMENT [Sec.197(12)] 42

43. Penal Provision [Sec. 197(15)] If Company not complied with the provisions of Sec.197, fine shall be: Min – 1.00 Lakh Max – 5.00 Lakhs CA, 1956 is silent about the penal provisions 43

44. REMUNERATION FROM HOLDING AND SUBSIDIARY COMPANY [SEC. 197(14)]  Any director who is in receipt of any commission from company and who is MD or WTD shall not be disqualified from receiving any remuneration or commission from holding company or subsidiary company.  This information shall be disclosed by company in the Board’s Report.  This Section does not cover Manager. Note : Under sec. 309(6) of CA,1956 MD/ WTD were not entitled to receive such remuneration and commission. 44

45. Commission to Non Executive Director  Company may pay such amount within the ceiling of 1% or 3% as to case may be  Approval of members will be required if commission exceed Ceiling limit.  Under Sec. 309(4) of CA, 1956 person who is not a WTD or MD can not be paid any remuneration otherwise than by way of commission, without approval of CG if passed by special resolution & its within the ceiling limit prescribed.  Does it mean, can we pay more than 1 % or 3 %, as the case may be, of Net Profits as commission, under CA 2013??? 45

46. REFUND OF EXCESS REMUNERATION PAID If any such director draws or receives, directly or indirectly, by way of fee / remuneration any such sums in excess of the limit as prescribed or without the prior sanction, such remuneration shall be refunded to the Company and until such sum is refunded, hold it in trust for the Company. The Company shall not waive the recovery of any sum refundable to it. 46

47. S CHEDULE V 47

48. A PPOINTMENT W ITHOUT A PPROVAL O F CG 48 (a) had not been sentenced to imprisonment for any period, or to a fine exceeding one thousand rupees, for the conviction of an offence under any of the 16 Acts. New in the list - the Prevention of Money-Laundering Act, 2002 (b) had not been detained for any period under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 (c)completed the age of 21 years and has not attained the age of 70 years

49. A PPOINTMENT W ITHOUT A PPROVAL O F CG 49 (d) where he is a managerial person in more than one company, he draws remuneration from one or more companies subject to the ceiling provided in section V of Part II; (e ) he is resident of India. staying in India for a continuous period of not less than 12 months immediately preceding the date of his appointment as a MR and who has come to stay in India,— ( i) for taking up employment in India; or ( ii) for carrying on a business or vacation in India. Not applicable to companies in SEZ, provided that a person, being a non-resident in India shall enter India only after obtaining a proper Employment Visa

50. REMUNERATION 50 Section I by companies having profits Subject to the provisions of section 197, a company having profits in a financial year may pay remuneration to a managerial person or persons not exceeding the limits specified in such section.

51. REMUNERATION 51 Section II by companies having no or inadequate profit without CG approval Where in any financial year during the currency of tenure of a managerial person, a company has no profits or its profits are inadequate, it may, without CG Approval, pay remuneration to the managerial person not exceeding the higher of the limits under (A) and (B) given below:—

52. REMUNERATION 52 Section II by companies having no or inadequate profit without CG approval (A) Where the effective capital is Limit of yearly remuneration payable shall not exceed (i ) Negative or < 5 crores 30 lakhs (ii ) 5 cr and above but < 100 Cr 42 lakhs (iii ) 100 cr and above < 250 Cr 60 lakhs (iv ) 250 crores and > 60 lakhs plus 0.01% of the effective capital in excess of Rs. 250 crores: Provided that the above limits shall be doubled if the resolution passed by the shareholders is a special resolution. If period is less than one year, the limits shall be pro-rated.

53. REMUNERATION 53 Section II by companies having no or inadequate profit without CG approval (B ) In the case of a managerial person who was not a security holder holding securities of the company of nominal value of Rs. 5 lakh or more or an employee or a director of the company or not related to any director or promoter at any time during the two years prior to his appointment as a managerial person, — 2.5% of the current relevant profit: Provided that if the resolution passed by the shareholders is a special resolution, this limit shall be doubled.

54. REMUNERATION 54 Section II by companies having no or inadequate profit without CG approval Provided further that the limits specified under this section shall apply, if— (i ) Approved by Board and by the Nomination and Remuneration Committee if company covered (ii ) the company has not made any default in repayment of any of its debts (including public deposits) or debentures or interest payable thereon for a continuous period of 30 days in the preceding FY (iii ) a special resolution has been passed at the general meeting of the company for payment of remuneration for a period not exceeding three years;

55. REMUNERATION 55 Section II by companies having no or inadequate profit without CG approval (iv ) a statement along with a notice calling the GM containing the following information, namely:— I. General Information: (1) Nature of industry (2) Date or expected date of commencement of commercial production (3) In case of new companies, expected date of commencement of activities as per project approved by financial institutions appearing in the prospectus (4) Financial performance based on given indicators (5) Foreign investments or collaborations, if any.

56. REMUNERATION 56 Section II by companies having no or inadequate profit without CG approval II. Information about the appointee: (1) Background details (2) Past remuneration (3) Recognition or awards (4) Job profile and his suitability (5) Remuneration proposed (6) Comparative remuneration profile with respect to industry, size of the company, profile of the position and person (in case of expatriates the relevant details would be with respect to the country of his origin) (7) Pecuniary relationship directly or indirectly with the company, or relationship with the managerial personnel, if any.

57. REMUNERATION 57 Section II by companies having no or inadequate profit without CG approval III. Other information: (1) Reasons of loss or inadequate profits (2) Steps taken or proposed to be taken for improvement (3) Expected increase in productivity and profits in measurable terms.

58. REMUNERATION 58 Section II by companies having no or inadequate profit without CG approval IV. Disclosures: The following disclosures shall be mentioned in the Board of Director’s report under the heading “Corporate Governance”, if any, attached to the financial statement:— (i)all elements of remuneration package such as salary, benefits, bonuses, stock options, pension, etc., of all the directors; (ii)details of fixed component and performance linked incentives along with the performance criteria; (iii) service contracts, notice period, severance fees; (iv) stock option details, if any, and whether the same has been issued at a discount as well as the period over which accrued and over which exercisable.

59. REMUNERATION 59 Section III Remuneration payable by companies having no profit or inadequate profit without Central Government approval in certain special circumstances In the following circumstances a company may, without the CG approval, pay remuneration to a managerial person in excess of the amounts provided in Section II above:— (a) where the remuneration in excess of the limits specified in Section I or II is paid by any other company and that other company is either a foreign company or has got the approval of its shareholders in general meeting to make such payment, and treats this amount as managerial remuneration for the purpose of section 197 and the total managerial remuneration payable by such other company to its managerial persons including such amount or amounts is within permissible limits under section 197.

60. REMUNERATION 60 Section III Remuneration payable by companies having no profit or inadequate profit without Central Government approval in certain special circumstances (b) where the company— (i) is a newly incorporated company, for a period of seven years from the date of its incorporation, or (ii) is a sick company, for whom a scheme of revival or rehabilitation has been ordered by the Board for Industrial and Financial Reconstruction or National Company Law Tribunal, for a period of five years from the date of sanction of scheme of revival, it may pay remuneration up to two times the amount permissible under Section II.

61. REMUNERATION 61 Section III Remuneration payable by companies having no profit or inadequate profit without Central Government approval in certain special circumstances (b) where the company— (i) is a newly incorporated company, for a period of seven years from the date of its incorporation, or (ii) is a sick company, for whom a scheme of revival or rehabilitation has been ordered by the Board for Industrial and Financial Reconstruction or National Company Law Tribunal, for a period of five years from the date of sanction of scheme of revival, it may pay remuneration up to two times the amount permissible under Section II.

62. REMUNERATION 62 (c ) where remuneration of a managerial person exceeds the limits in Section II but the remuneration has been fixed by the BIFR or NCLT Provided that the limits under this Section shall be applicable subject to meeting all the conditions specified under Section II and the following additional conditions:— (i ) except as provided in para (a ) of this Section, the managerial person is not receiving remuneration from any other company; (ii ) the auditor or CS of the company or where the company has not appointed a Secretary, a PCS, certifies that all secured creditors and term lenders have stated in writing that they have no objection for the appointment of the managerial person as well as the quantum of remuneration and such certificate is filed along with the return as prescribed under section 196 (4). (iii) the auditor or CS or where the company has not appointed a secretary, a PCS that there is no default on payments to any creditors, and all dues to deposit holders are being settled on time.

63. REMUNERATION 63 (d ) a company in a Special Economic Zone as notified by Department of Commerce from time to time which has not raised any money by public issue of shares or debentures in India, and has not made any default in India in repayment of any of its debts (including public deposits) or debentures or interest payable thereon for a continuous period of thirty days in any financial year, may pay remuneration up to Rs. 2.4 Cr per annum.

64. REMUNERATION S ECTION IV 64 Perquisites not included in managerial remuneration: 1. A managerial person shall be eligible for the following perquisites which shall not be included in the computation of the ceiling on remuneration specified in Section II and III:— (a)contribution to provident fund, superannuation fund or annuity fund to the extent these either singly or put together are not taxable under the Income-tax Act, 1961 (b) gratuity payable at a rate not exceeding half a month’s salary for each completed year of service; and (c) encashment of leave at the end of the tenure.

65. REMUNERATION S ECTION IV 65 Perquisites not included in managerial remuneration: 1. A managerial person shall be eligible for the following perquisites which shall not be included in the computation of the ceiling on remuneration specified in Section II and III:— (a)contribution to provident fund, superannuation fund or annuity fund to the extent these either singly or put together are not taxable under the Income-tax Act, 1961 (b) gratuity payable at a rate not exceeding half a month’s salary for each completed year of service; and (c) encashment of leave at the end of the tenure.

66. REMUNERATION - S ECTION IV 66 Perquisites not included in managerial remuneration: 2. In addition to the perquisites specified in paragraph 1 of this section, an expatriate managerial person (including a non-resident Indian) shall be eligible to the following perquisites which shall not be included in the computation of the ceiling on remuneration specified in Section II or Section III— (a ) Children’s education allowance: In case of children studying in or outside India, an allowance limited to a maximum of Rs. 12,000 per month per child or actual expenses incurred, whichever is less. (two children). (b) Return holiday passage once in a year by economy class or once in two years by first class to children and to the members of the family from the place of their study or stay abroad to India if they are not residing in India, with the managerial person. (c ) LTC: Return passage for self and family in accordance with the rules specified by the company where it is proposed that the leave be spent in home country instead of anywhere in India.

67. REMUNERATION - S ECTION IV 67 “effective capital” means the aggregate of the paid-up share capital (excluding share application money or advances against shares); amount, if any, for the time being standing to the credit of share premium account; reserves and surplus (excluding revaluation reserve); long-term loans and deposits repayable after one year (excluding working capital loans, over drafts, interest due on loans unless funded, bank guarantee, etc., and other short-term arrangements) as reduced by the aggregate of any investments (except in case of investment by an investment company whose principal business is acquisition of shares, stock, debentures or other securities), accumulated losses and preliminary expenses not written off. ‘‘family’’ means the spouse, dependent children and dependent parents of the managerial person.

68. REMUNERATION - S ECTION IV 68 “effective capital” means the aggregate of the paid-up share capital (excluding share application money or advances against shares); amount, if any, for the time being standing to the credit of share premium account; reserves and surplus (excluding revaluation reserve); long-term loans and deposits repayable after one year (excluding working capital loans, over drafts, interest due on loans unless funded, bank guarantee, etc., and other short-term arrangements) as reduced by the aggregate of any investments (except in case of investment by an investment company whose principal business is acquisition of shares, stock, debentures or other securities), accumulated losses and preliminary expenses not written off. ‘‘family’’ means the spouse, dependent children and dependent parents of the managerial person.

69. REMUNERATION – S ECTION V 69 Remuneration payable to a managerial person in two companies: Subject to the provisions of sections I to IV, a managerial person shall draw remuneration from one or both companies, provided that the total remuneration drawn from the companies does not exceed the higher maximum limit admissible from any one of the companies of which he is a managerial person.

70. REMUNERATION – PART III 70 Provisions applicable to Parts I and II of this Schedule 1. Appointment and remuneration referred to in Part I and Part II of this Schedule shall be subject to approval by a resolution of the shareholders in general meeting. 2.The auditor or the Secretary of the company or where the company is not required to appointed a Secretary, a Secretary in whole-time practice shall certify that the requirement of this Schedule have been complied with and such certificate shall be incorporated in the return filed with the Registrar under sub-section (4) of section 196.

71. REMUNERATION – PART III 71 Provisions applicable to Parts I and II of this Schedule 1. Appointment and remuneration referred to in Part I and Part II of this Schedule shall be subject to approval by a resolution of the shareholders in general meeting. 2.The auditor or the Secretary of the company or where the company is not required to appointed a Secretary, a Secretary in whole-time practice shall certify that the requirement of this Schedule have been complied with and such certificate shall be incorporated in the return filed with the Registrar under sub-section (4) of section 196.

72. REMUNERATION – PART IV 72 The Central Government may, by notification, exempt any class or classes of companies from any of the requirements contained in this Schedule.

73. Q UESTIONS ? 73

74. 74