Executive Overview & Quick Highlights
In Indian corporate governance and company law, the regulation of managerial remuneration represents one of the most critical legal frameworks governing public companies and their subsidiaries. Codified under Section 197 read with Section 198 and Schedule V of the Companies Act, 2013, the statute establishes a delicate equilibrium between commercial incentives for executive leadership and the fiduciary protection of public shareholder capital and lender wealth.
Historically, paying executive salaries beyond statutory caps required cumbersome prior approvals from the Central Government (Ministry of Corporate Affairs). The Companies (Amendment) Act, 2017 dismantled this bureaucratic bottleneck, shifting regulatory authority directly to company shareholders through Special Resolutions, backed by mandatory No Objection Certificates (NOCs) from banks, financial institutions, and non-convertible debenture holders in the event of subsisting debt defaults. However, this statutory liberalization was coupled with heightened audit accountability. Statutory auditors must report under Section 197(16) whether remuneration paid complies with statutory ceilings, secretarial auditors must certify compliance in Form MR-3, and boards must publish granular median-salary ratios under Section 197(12) read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.
The operational challenge for CFOs, corporate legal heads, and audit committees lies in navigating multi-tiered mathematical caps: the overall 11% net profit ceiling under Section 197(1), individual executive caps of 5% and 10%, non-executive director limits of 1% or 3%, and the complex Effective Capital Tier Matrix under Schedule V Part II for companies with inadequate profits or operating losses. Furthermore, paying remuneration in excess of statutory limits triggers immediate personal liability under Section 197(9)—mandating that the director hold the excess sum in trust for the company and refund it within two years, unless shareholders formally waive recovery by special resolution with creditor concurrence under Section 197(10).
By leveraging dedicated corporate governance and financial modeling tools like assureFinancials and assurePractice from the assureOffice suite, corporate enterprises can mathematically model Section 198 net profits, verify Effective Capital parameters, execute compliant board and general meeting resolutions, and avoid severe regulatory penalties under Section 197(15).
Core Highlights of the Managerial Remuneration Framework
- Scope of Applicability: Section 197 applies strictly to public companies and private companies that are subsidiaries of public companies under Section 2(71). Pure standalone private companies are completely exempt.
- The 11% Master Ceiling: Total managerial remuneration payable by a public company to its directors (including managing director, whole-time director, and manager) in any financial year cannot exceed 11% of the net profits calculated under Section 198.
- Sub-Caps for Individual Directors: Without a special resolution, remuneration cannot exceed 5% of net profits for a single executive director, 10% for multiple executive directors, 1% for non-executive directors (if executive directors exist), or 3% (if no executive director exists).
- Schedule V Loss-Making Protection: Where a company has no profits or inadequate profits, remuneration is governed by Schedule V Part II, capping payouts based on the company's "Effective Capital" across four statutory tiers (from ₹60 Lakhs up to ₹120 Lakhs plus 0.01% of capital exceeding ₹250 Crores, doubled with shareholder special resolution).
- Mandatory Creditor NOC Requirement: If a company has defaulted in payment of dues to banks, public financial institutions, or secured creditors, no remuneration exceeding statutory sub-caps or Schedule V limits can be sanctioned without prior written creditor approval.
- Strict Recovery and Waiver Rules: Any excess remuneration paid must be refunded by the director within two years under Section 197(9). Waiver of recovery requires a special resolution within two years, supported by creditor approval.
Detailed Statutory Architecture & Legislative Logic
The legislative intent behind Section 197 is anchored in corporate democracy and anti-siphoning principles. In public corporations where capital is contributed by public shareholders and institutional lenders, executive management must not divert operating cash flows into exorbitant remuneration packages, especially when enterprises face operational distress.
The framework operates across three interconnected statutory pillars:
- Section 197: Prescribes the substantive ceilings, approval hierarchies (ordinary vs special resolutions), professional capacity exemptions, and recovery mechanisms.
- Section 198: Formulates the mandatory accounting methodology for computing "Net Profits" specifically for managerial remuneration, adjusting standard P&L figures for capital profits, non-operating subsidies, and specific allowable/disallowable debits.
- Schedule V: Prescribes conditions for appointments without Central Government approval (Part I), remuneration payable in cases of inadequate profits (Part II), and provisions applicable to professional directors (Part II Section IV).
Comparative Analysis: Remuneration Framework across Corporate Entities
| Parameter | Standalone Private Company | Public Limited Company | Listed Public Entity (SEBI LODR) |
|---|---|---|---|
| Applicability of Section 197 & 198 | Completely exempt under Section 197(1) | Mandatory compliance with 11% cap & Section 198 | Mandatory compliance with 11% cap & Section 198 |
| Ceiling on Remuneration | No statutory ceiling; governed by AOA and Board | 11% of Net Profits (exceedable via Special Resolution) | 11% of Net Profits + SEBI LODR Regulation 17(6) caps |
| Inadequate Profit / Loss Regime | Unlimited; governed purely by contract | Restricted strictly to Schedule V Effective Capital tiers | Restricted to Schedule V + Shareholder Special Resolution |
| Nomination & Remuneration Committee | Not mandatory under Section 178 | Mandatory if capital ≥ ₹10 Cr or turnover ≥ ₹100 Cr | Mandatory for all listed entities under Reg 19 |
| Auditor Reporting Obligation | None under Section 197(16) | Mandatory auditor report under Section 197(16) | Mandatory auditor report + Secretarial Audit (MR-3) |
| Public Disclosure of Salary Ratios | Exempt from Section 197(12) | Mandatory disclosure of median salary ratios in Board Report | Mandatory disclosure in Annual Report & Corporate Governance Report |
Deep-Dive Technical Mechanics & Multi-Act Interplay
1. Mathematical Computation of Net Profits under Section 198
Net profit for Section 197 is not synonymous with "Profit After Tax" (PAT) or "Profit Before Tax" (PBT) reported under Schedule III. Section 198 establishes a distinct statutory formula:
Permitted Credits (Subsection 2):
- Bounties and subsidies received from the Government or public authorities.
- Normal operating gross receipts and revenue from operations.
Prohibited Credits (Subsection 3) — Must be Excluded from Net Profit:
- Profits by way of premium on shares or debentures issued by the company.
- Profits on sales by the company of forfeited shares.
- Profits of a capital nature, including profits from the sale of the undertaking or any part thereof.
- Profits from the sale of any immovable property or capital asset, except to the extent the sale price exceeds the written-down value up to the original cost.
- Any change in the carrying amount of an asset or liability recognized in equity or other comprehensive income (unrealized mark-to-market fair value gains under Ind AS).
Mandatory Debits (Subsection 4):
- All usual working charges and administrative overheads.
- Directors' remuneration paid or payable.
- Bonus or commission paid or payable to staff.
- Interest on debentures, mortgages, and unsecured loans.
- Expenses on repairs and maintenance to movable/immovable properties.
- Depreciation computed in accordance with Section 123 read with Schedule II.
- Excess of expenditure over income incurred in previous years (losses of preceding years to the extent not previously deducted).
Prohibited Debits (Subsection 5) — Cannot be Deducted:
- Income tax and super-tax payable by the company under direct tax laws.
- Any compensation, damages, or payments made voluntarily.
- Loss of a capital nature, including loss on the sale of an undertaking.
2. The Schedule V Effective Capital Tier Matrix
Where a company has no profits or its net profit computed under Section 198 is inadequate to support commercial remuneration, Section 197(3) mandates that the company must comply with Schedule V Part II Section II.
Under Schedule V, annual remuneration is capped based on the company's Effective Capital:
| Tier | Effective Capital Limit | Annual Limit (Ordinary Resolution) | Annual Limit (Special Resolution) |
|---|---|---|---|
| Tier A | Negative or less than ₹5 Crore | ₹60 Lakhs per annum | ₹120 Lakhs per annum |
| Tier B | ₹5 Crore or more but less than ₹100 Crore | ₹84 Lakhs per annum | ₹168 Lakhs per annum |
| Tier C | ₹100 Crore or more but less than ₹250 Crore | ₹120 Lakhs per annum | ₹240 Lakhs per annum |
| Tier D | ₹250 Crore and above | ₹120 Lakhs + 0.01% of Effective Capital in excess of ₹250 Crore | ₹240 Lakhs + 0.02% of Effective Capital in excess of ₹250 Crore |
Formula for Calculating Effective Capital (Explanation I to Part II):
Effective Capital = (Paid-up Share Capital + Share Application Money & Advances + Securities Premium + Reserves & Surplus [excluding Revaluation Reserve] + Long-Term Borrowings [repayable after 1 year]) MINUS (Investments + Accumulated Losses + Preliminary Expenses not written off).
3. Professional Capacity Exemption under Section 197(4)
Under Section 197(4), any remuneration paid to a director for services rendered in a professional capacity is excluded from the 11% ceiling, provided two conditions are met:
- The service rendered is of a purely professional nature (e.g., specialized legal counsel, patented technical engineering design, or medical surgery); and
- In the opinion of the Nomination and Remuneration Committee (NRC) or the Board of Directors, the director possesses the requisite professional qualifications for practicing the profession.
However, under Schedule V Part II Section IV, this exemption cannot be exploited if the professional director holds more than 0.5% shareholding in the company or its holding company, or is related to promoters, preventing disguised executive compensation.
4. Recovery and Waiver Protocol under Section 197(9) & (10)
If any director draws or receives, directly or indirectly, by way of remuneration any sum in excess of the statutory limits prescribed under Section 197 or Schedule V without the required approvals:
- The director holds the excess sum in trust for the company and must refund it within two years (or such lesser period allowed by the company).
- The company cannot waive the recovery of any excess sum unless permitted by a Special Resolution passed within two years from the date the sum became refundable.
- If the company has defaulted in payment of dues to banks, financial institutions, or secured creditors, the prior approval of such creditors is an absolute condition precedent before shareholders can vote on a waiver resolution.
- Under Section 197(15), any person who contravenes the section is liable to a statutory penalty of ₹1,00,000 for the company and ₹50,000 for every defaulting officer.
Real-World Practical Challenges & Worked Numerical Case Studies
Case Study 1: Profitable Public Company Modeling Section 198 Net Profits
Context: Precision Heavy Forgings Limited is an unlisted public company with two Whole-time Directors (WTD-A and WTD-B), one Managing Director (MD), and three Independent Directors. In FY 2026-27, its financial statements reflect a Profit Before Tax (PBT) of ₹45,00,00,000.
Section 198 Statutory Adjustments:
- Reported PBT under Schedule III: ₹45,00,00,000
- Less: Profit on sale of factory land in Pune (Capital Profit): (₹6,00,00,000)
- Less: Fair value unrealized gain on mutual funds recognized in P&L: (₹1,50,00,000)
- Add: Directors' remuneration already debited in P&L: ₹3,50,00,000
- Add: Voluntary donation to an unapproved cultural club: ₹20,00,000
- Less: Brought-forward unadjusted operational loss from FY 2024-25: (₹1,20,00,000)
- Net Profit Computed under Section 198: ₹45,00,00,000 – ₹6,00,00,000 – ₹1,50,00,000 + ₹3,50,00,000 + ₹20,00,000 – ₹1,20,00,000 = ₹40,00,00,000
Statutory Ceilings Allocation:
- Overall 11% Ceiling across All Directors: ₹40,00,00,000 × 11% = ₹4,40,00,000
- Sub-Cap for Managing Director (5%): ₹40,00,00,000 × 5% = ₹2,00,00,000
- Sub-Cap for All Executive Directors Combined (MD + 2 WTDs) (10%): ₹40,00,00,000 × 10% = ₹4,00,00,000
- Sub-Cap for 3 Independent Directors (1% combined): ₹40,00,00,000 × 1% = ₹40,00,000
The company structures executive payouts at ₹1.8 Crore for MD, ₹1.1 Crore each for WTD-A and WTD-B (total ₹4.0 Crore for executives), and ₹40 Lakhs distributed equally among the three Independent Directors (₹13.33 Lakhs each). The total payout of ₹4.40 Crore perfectly satisfies the 11% ceiling under ordinary resolution.
Case Study 2: Technology Public Company Facing Inadequate Profits (Schedule V Tiering)
Context: NexaCloud Systems Limited, an unlisted public enterprise, experiences transitional operational losses due to heavy cloud infrastructure R&D. In FY 2026-27, its net profit under Section 198 is a meager ₹15,00,000. The Board proposes an annual remuneration package of ₹1,80,00,000 for its Managing Director.
Effective Capital Computation as on March 31, 2026:
- Paid-Up Equity Share Capital: ₹35,00,00,000
- Securities Premium Reserve: ₹40,00,00,000
- Long-Term Bank Term Loan (repayable in 2030): ₹25,00,00,000
- Total Gross Capital Components: ₹100,00,00,000
- Less: Non-Current Investments in Mutual Funds: (₹12,00,00,000)
- Less: Accumulated Debit Balance in P&L: (₹18,00,00,000)
- Net Effective Capital: ₹100,00,00,000 – ₹12,00,00,000 – ₹18,00,00,000 = ₹70,00,00,000
Schedule V Limits Determination:
- Effective Capital of ₹70 Crore falls under Tier B (₹5 Crore to ₹100 Crore).
- Standard Limit under Ordinary Resolution: ₹84,00,00,000? No, ₹84,00,000 per annum.
- Enhanced Limit under Special Resolution: ₹1,68,00,000 per annum (Double the standard limit).
The proposed remuneration of ₹1,80,00,000 exceeds the maximum permissible special resolution ceiling of ₹1.68 Crore by ₹12 Lakhs. The Nomination and Remuneration Committee restricts the fixed remuneration to ₹1,68,00,000, convening an Extraordinary General Meeting to pass a Special Resolution, completely eliminating regulatory violation.
Case Study 3: Bank Loan Default and Mandatory Lender NOC
Context: BuildCon Infra Limited has an outstanding working capital term loan of ₹40 Crore from State Bank of India. On June 30, 2026, the company defaults on quarterly interest payments of ₹95,00,000, classified as an SMA-2 account. In August 2026, the company convenes an AGM to approve a special resolution paying its CEO ₹2,50,00,000 under Schedule V.
Statutory Roadblock under Section 197(3) Proviso:
The third proviso to Section 197(1) and the proviso to Schedule V Part II Section II explicitly mandate: "Provided that the company has not committed any default in payment of dues to any bank or public financial institution or non-convertible debenture holders or other secured creditor, and in case of default, the prior approval of the bank or financial institution... shall be obtained by the company before obtaining the approval in general meeting."
Passing a special resolution without SBI's written prior approval renders the resolution null and void. The company pauses the AGM vote, clears the overdue interest of ₹95 Lakhs, regularizes the account, obtains a formal written NOC from SBI's Credit Committee, and subsequently places the resolution before shareholders.
Case Study 4: Inadvertent Excess Remuneration and Section 197(10) Waiver
Context: Zenith Electricals Limited paid its Whole-time Director ₹1,50,00,000 based on projected Q3 net profits. However, in Q4, unexpected inventory obsolescence write-downs reduced final Section 198 net profits to ₹10,00,00,000. Under the 5% sub-cap, the maximum permissible remuneration was ₹50,00,000. The director received an excess of ₹1,00,00,000.
Recovery & Waiver Execution:
- Under Section 197(9), the director holds the ₹1,00,00,000 in trust and is legally bound to refund it within two years.
- The Board reviews the director's exceptional contribution to securing export orders and recommends waiving the refund under Section 197(10).
- The company verifies that it has zero subsisting defaults with lenders.
- Within eighteen months of the financial year close, the company issues notice of an EGM and passes a Special Resolution formally waiving the recovery of the ₹1,00,00,000.
- The statutory auditor reports the complete waiver details in the financial statement notes and CARO report, ensuring full regulatory transparency.
Case Study 5: Non-Executive Independent Director Professional Fee Dispute
Context: Supreme Steel Tubes Limited engages Dr. Arvind Raman, a senior Non-Executive Independent Director and renowned metallurgist, to provide specialized technical consulting for patenting a high-corrosion alloy. The company pays him ₹60,00,00,00? No, ₹60,00,000 as professional consulting fees, while its total net profits under Section 198 are ₹20,00,00,000 (1% non-executive cap = ₹20,00,000).
Defense under Section 197(4):
The ROC issues a show-cause notice alleging that paying ₹60 Lakhs to a non-executive director exceeds the 1% ceiling (₹20 Lakhs) by ₹40 Lakhs. The company submits:
- Dr. Raman holds a doctorate in metallurgy and runs an independent research consultancy (requisite professional qualifications).
- Dr. Raman holds exactly zero shares in the company (satisfies the < 0.5% shareholding threshold under Schedule V).
- The Nomination & Remuneration Committee recorded a formal resolution expressing its opinion that the services rendered were purely of a professional character.
Under Section 197(4), professional fees are statutorily excluded from the 11% and 1% managerial remuneration caps. The ROC accepts the submission and drops the inquiry.
Case Study 6: Deemed Public Company Subsidiary Governance
Context: NovaLogistics Private Limited is a wholly owned subsidiary of NovaCorp Limited (a listed public company). NovaLogistics' board paid its Managing Director ₹3,00,00,000, arguing that as a private limited company, it is exempt from Section 197 limits.
Statutory Trap under Section 2(71):
The proviso to Section 2(71) of the Companies Act, 2013 explicitly dictates: "Provided that a company which is a subsidiary of a company, not being a private company, shall be deemed to be public company for the purposes of this Act even where such subsidiary company continues to be a private company in its articles."
Consequently, NovaLogistics is a "deemed public company." Section 197 applies in its entirety. Because the company failed to calculate Section 198 net profits and did not pass a special resolution, the ₹3 Crore payout violates company law. The statutory auditor qualifies the report under Section 197(16), and the company is forced to execute retrospective shareholder ratifications and file compounding applications under Section 441.
Case Study 7: Secretarial Audit Form MR-3 Disclosures and Median Ratios
Context: AgroTech Global Limited underwent secretarial audit for FY 2026-27. The company's median employee remuneration was ₹6,50,000 per annum, while the Managing Director's total remuneration package was ₹5,20,00,000 (a ratio of 80:1).
Compliance Execution under Section 197(12) read with Rule 5:
In its Board's Report and Form MR-3, the company must provide an itemized disclosure table showing: (i) the ratio of the remuneration of each director to the median remuneration of the employees; (ii) the percentage increase in remuneration of each director and CFO/CS; (iii) the percentage increase in the median remuneration of employees (e.g., 8.2%); and (iv) affirmation that remuneration is as per the remuneration policy of the company. Secretarial auditors verify the underlying payroll databases through assurePractice, certifying clean compliance without adverse qualifications.
Step-by-Step Audit & Compliance Verification Checklist
Corporate secretarial teams and statutory auditors should execute this systematic 10-step protocol to ensure full compliance with Section 197 and Schedule V:
| Step | Compliance Verification Action | Primary Tool / Record | Statutory Reference |
|---|---|---|---|
| 1 | Confirm company status: verify if standalone private, public, or subsidiary of a public company | MCA Master Data / MGT-7 | Section 2(71) Proviso |
| 2 | Reconstruct Profit & Loss Account to compute Section 198 Net Profits, adjusting capital gains & reserves | assureFinancials Section 198 Engine | Section 198(2)-(5) |
| 3 | Check whether proposed executive payouts fall within 5% (single) and 10% (multiple) sub-caps | Board Meeting Minutes | Section 197(1) Proviso 1 |
| 4 | If profits are inadequate or negative, compute Effective Capital across Schedule V Tiers A to D | Effective Capital Ledger | Schedule V Part II |
| 5 | Audit subsisting loan accounts for defaults; secure written NOCs from banks/debenture holders if in default | Bank Consortium Statements | Section 197(1) Proviso 3 |
| 6 | Draft explanatory statements and convene General Meeting to pass Special Resolution if limits are exceeded | Form MGT-14 Dossier | Section 114 / Section 197 |
| 7 | File Form MR-1 (Return of appointment of MD/WTD/Manager) with ROC within 60 days of appointment | MCA Form MR-1 | Section 196 / Rule 7 |
| 8 | Audit professional fee payments to directors to confirm Section 197(4) qualifications and < 0.5% shareholding | NRC Opinion Resolutions | Schedule V Part II Sec IV |
| 9 | Compute median employee salary ratios and percentage increases for Board's Report disclosures | Payroll Master Database | Rule 5(1) Remuneration Rules |
| 10 | Statutory auditor certifies compliance under Section 197(16) and CARO 2020 Clause (xi) in audit report | Statutory Audit Report | Section 197(16) / CARO |
Workflow Integration with the assureOffice Ecosystem
Managing executive contracts, modeling complex Section 198 net profit formulas, tracking multi-tier Effective Capital caps, and generating statutory secretarial disclosures demands unified corporate technology. The assureOffice suite equips corporate leadership with dedicated tooling:
- assureFinancials: Features an automated Section 198 computational engine that extracts trial balances, isolates capital profits, unrealized Ind AS mark-to-market entries, and debits permissible depreciation. It models Schedule V Effective Capital calculations across Tiers A through D, instantly flagging potential statutory breaches.
- assurePractice: Empowers company secretaries and practicing CAs to manage board governance workflows, track Form MR-1 filing windows, manage Form MGT-14 special resolution filings, and generate pre-drafted lender NOC templates for bank consortiums.
- assureTax: Reconciles managerial remuneration debited in financial accounts with Form 3CD Clause 21(a) and Clause 23 related-party benchmarks under Section 40A(2)(b), ensuring corporate tax returns match secretarial filings.
- assureNotice: Monitors MCA v3 portal notifications, tracks ROC inquiry notices regarding managerial salary disclosures, and provides pre-drafted legal response petitions for Section 441 compounding proceedings.
16 Detailed Practitioner FAQs
1. Does Section 197 apply to private limited companies?
Section 197 applies to public companies. Pure standalone private companies are completely exempt. However, under the proviso to Section 2(71), a private company that is a subsidiary of a public company is deemed to be a public company, making Section 197 fully applicable.
2. What is the overall statutory ceiling on managerial remuneration for a public company?
Under Section 197(1), total managerial remuneration payable by a public company to its directors in any financial year cannot exceed 11% of the net profits of the company computed in accordance with Section 198.
3. Can a public company pay more than 11% of its net profits as remuneration?
Yes. The company can pay remuneration exceeding 11% of net profits if such payment is approved by the shareholders in a general meeting by way of a Special Resolution, subject to obtaining prior written approval from banks or secured creditors if the company has defaulted on debt obligations.
4. What are the sub-caps on remuneration for individual executive directors?
Without a special resolution, remuneration cannot exceed 5% of net profits if there is only one managing or whole-time director, or 10% of net profits for all such directors combined if there are more than one.
5. What is the limit on remuneration payable to Non-Executive and Independent Directors?
Under Section 197(1), remuneration payable to non-executive directors cannot exceed 1% of net profits if the company has a Managing or Whole-time Director, or 3% of net profits if the company does not have a Managing or Whole-time Director.
6. How is remuneration regulated when a company has no profits or inadequate profits?
Under Section 197(3), where a company has no profits or inadequate profits, remuneration must be paid strictly in accordance with Schedule V Part II, which prescribes limits based on the company's Effective Capital.
7. How is Effective Capital calculated under Schedule V?
Effective Capital equals Paid-up Share Capital + Share Application Money + Securities Premium + Reserves & Surplus (excluding Revaluation Reserve) + Long-term Borrowings minus Investments, Accumulated Losses, and Preliminary Expenses.
8. When is prior approval of banks or financial institutions mandatory for managerial remuneration?
Prior approval of banks, public financial institutions, or non-convertible debenture holders is mandatory if the company has committed any default in the payment of dues or interest to such lenders, before seeking shareholder approval.
9. Can a director receive sitting fees in addition to managerial remuneration?
Yes. Under Section 197(5), a director may receive sitting fees for attending board or committee meetings (up to ₹1,00,000 per meeting), which is excluded from the calculation of the 11% managerial remuneration cap.
10. Are professional fees paid to a director counted within the Section 197 limits?
No. Under Section 197(4), fees paid for services rendered in a professional capacity are excluded from the 11% ceiling, provided the director possesses the requisite qualifications and the Nomination & Remuneration Committee confirms the professional nature of the service.
11. What is the statutory time limit for recovering excess remuneration paid to a director?
Under Section 197(9), the director holds the excess remuneration in trust for the company and must refund it within two years, or such lesser period as allowed by the company.
12. Can a company waive the recovery of excess remuneration paid to an executive?
Yes. The company can waive recovery under Section 197(10) by passing a Special Resolution within two years from the date the sum became refundable, provided prior approval is obtained from secured lenders if the company is in default.
13. What is the statutory reporting obligation of auditors under Section 197(16)?
Under Section 197(16), the statutory auditor must state in their audit report whether the managerial remuneration paid by the company is in accordance with Section 197, and whether any remuneration paid exceeds statutory limits.
14. What form must be filed with the ROC upon appointing a Managing Director or Whole-time Director?
Under Section 196 read with Rule 7, the company must file Form MR-1 (Return of appointment of managerial personnel) with the Registrar of Companies within 60 days of the appointment.
15. What are the mandatory disclosures required in the Board's Report under Section 197(12)?
Under Rule 5(1), the Board's Report must disclose the ratio of remuneration of each director to the median remuneration of employees, the percentage increase in remuneration of directors, and percentage increase in median employee salaries.
16. What is the penalty for violating Section 197 provisions?
Under Section 197(15), any person who contravenes Section 197 is liable to a penalty of ₹1,00,000 for the company, and ₹50,000 for every defaulting officer of the company.