NEW DELHI: In a bid to make life simpler, the ministry of corporate affairs has done away with the requirement for public companies to seek government approval for
salaries beyond a threshold to their managerial personnel.
“In a move designed to empower common
shareholders of a company, the government has notified that remuneration in excess of individual limits laid down for executive and non-executive directors shall henceforth be approved by shareholders through a special resolution,” the ministry said in a statement on Thursday.
However, it has stipulated that public companies that have defaulted in payment of dues to a bank, other secured creditors or non-convertible debenture holders, will need government nod before seeking shareholder approval. Under the Companies Act, 2013, there are public as well as private companies. Generally, those with more than 200 members are classified as public companies and they have to follow stricter corporate governance norms. There are more than 70,000 public companies, as per official data.
The approval of the “central government shall no longer be required for the payment of remuneration to managerial personnel (in excess of 11% of the net profit of a company),” the statement said.
The government said following change in rules, which is effective Wednesday, all pending applications for approval of managerial remuneration in excess of the prescribed limit will automatically abate.
In recent months, the government has initiated a series of steps, including faster incorporation of companies and doing away with unnecessary approvals for companies. At the same time, MCA is working on tightening the provisions for errant companies, especially shell companies and bogus directors.
