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  Date : 15-08-2015   Platform/Online Media: ICSI E- Newsletter: Your Story Source

Whether Managerial Remuneration provisions in Section 197 of the companies Act 2013 are applicable to Private companies?

Due to poor drafting in section 197 of the Companies Act 2013 dealing with remuneration provisions and the absence of an explicit provision therein that it does not apply to private companies, there was confusion on its applicability to private companies.Rule 7(2) of the Companies (Appointment & Remuneration of Managerial Personnel) Rules 2014 exempt private companies from the remuneration ceilings but this Rule seems to go beyond section 197(3) and hence ultra vires.

Central Govt. recently issued notification dated 5th June 2015 exempting several provisions of the Companies Act 2013 for private companies. Serial No. 16 thereof exempts private companies from section 196(4) dealing with appointment and remuneration of managerial personnel but which is subject to section 197 and Schedule V. Hence, there is a doubt whether remuneration provisions of section 197 and Schedule V continue to apply to private companies.