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  • Writer's pictureShruti Sharma

Rule 7 of Amendment To Companies (Appointment And Remuneration Of Managerial Personnel) Rules, 2014

Updated: Oct 4, 2022






The Ministry of Corporate Affairs ("MCA") revised the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 ("Managerial Remuneration Rules, 2014") on June 30, 2016, by issuing the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2016. ("Amended Managerial Remuneration Rules, 2016").

Rule 7 is regarding the Fees and contains three clauses and five sub-clauses. The clauses are as follows:-

(1) The first clause states that any application made to the Central Government under the provisions of Chapter XIII must be in Form No. MR.2 and must be accompanied by the fee prescribed for the purpose.

2) The second clause specifies that companies other than listed companies and a subsidary of a listed company may pay remuneration to its managerial personnel without Central Government approval in the event of no profit or insufficient profit beyond the ceiling specified in Section II, Part II of Schedule V, subject to the following conditions:

a) payment of remuneration is approved by a resolution passed by the Board and, in the case of a company covered by sub-section (1) of section 178, also by the Nomination and Remuneration Committee if any, and while doing so, the clear reason and justification for payment of remuneration in excess of the said limit is recorded in writing;

b)For a continuous period of thirty days prior to the date of payment to such managerial employees, the company has not defaulted in repayment of any of its obligations (including public deposits), debentures, interest payable on preference shares, or dividend on preference shares.

c)the consent of shareholders by a special resolution at the company's general meeting for payment of remuneration for a period not exceeding three years;

d) a statement, along with a notice calling the general meeting referred to in clause (iii) of sub-rule (2) above, shall contain the information specified in clause (iv) of the second proviso to clause (B) of section II of part-II of Schedule V of the Act, including reasons and justification for payment of remuneration in excess of the specified limit;

e) The company has submitted its Balance Sheet and Annual Return to the Registrar of Companies.

3) The last clause states that Any such application for approval must be presented to the Central Government within ninety days of the date of such appointment.

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