Section 149 Number of Directors Woman Director Resident Director

(Company to have At least 1-woman director in every

Board of Directors) Minimum - Every company must
3 Public Public company having have 1 resident
2 Private Listed company or P ≥ 100 crore director
1 OPC T ≥ 300 crore - Meaning – who has
Intermittent vacancy filled by Board stayed in India for ≥
Maximum – 15 182 days during the
- Immediate next BM, or whichever is
(can be increased by SR)
- 3 months }later FY
Note – Limit of maximum N.A. to Sec. 8
& Govt. company

Independent director (ID)

149(4) 149(6)

Public company having a. Person of integrity, expertise & experience

Listed Public P ≥ 10 crore b. - Not a promoter of CASH
company L ≥ 50 crore - Not related to P or D of CASH
T ≥ 100 crore c. No pecuniary relation with CASH  Remuneration allowed
≥ 1/3rd of total or their P or D - 2 years
directors
≥ 2 ID  Transactions up to 10% of his
total income allowed
d. His relative is not
 Intermittent vacancy filled by Board
1. holding Security in CASH – 2 1. May hold upto FV 50 lakh or
- Immediate next BM, or whichever
- 3 months } is later years 2% of paid-up capital
2. Indebted to CASH or P or D– 2 2. Exception - 50 lakh
 If above limits breached once, will have years
to appoint ID for next 3 years
 JV, WOS, Dormant company is NOT 3. Guarantee or Security to CASH 3. Exception - 50 lakh
covered or P or D – 2 years
 Other points 4. Any other pecuniary relation 4. Exception – 2% of turnover or
with CASH income in combination of above
- Must give a declaration of his
independence
- Comply with Schedule IV e. He or his relative is not
- Not entitled to ESOP 1. KMP or employee of CASH – 3 years – However, relative can be
- Not liable to retire by rotation employee
2. Not an Employee/ Proprietor/ Partner – 3 years
- Auditor/ CS/ Cost auditor of CASH
- Consulting firm of CASH deriving ≥ 10% of income
3. Holds with his relatives ≥ 2% voting power in company
4. CEO/ Director of NPO that
- receives ≥ 25% from CASH or P or D of company
- holds ≥ 2% voting power in Company
f. Possesses other prescribed qualification – appropriate skills in
specified fields
Term
 First term of maximum 5 years (1st term by OR)
 And maximum 2 terms permitted (2nd term by SR)
 Cooling-off period of 3 years
Section 150  CG may notify an institute, which will maintain a data bank of persons eligible and willing to become independent director
(Data Bank)  However, the responsibility of exercising due diligence before selecting a person is of the company

Section 151 Applicability Procedure to appoint

(Small  Every listed company
Shareholders’
Director, SSD)  It may appoint 1 director elected
by small shareholders
 Meaning of small shareholder –
one who holds shares of
NOMINAL VALUE ≤ INR 20,000
 Application to appoint SSD by
≥ 1,000 small shareholders, or
≥ 1/10th of total small
shareholders
 These small shareholders shall
whichever
give a notice for appointing SSD
at least 14 days before meeting
} is lower  SSD need not be a shareholder
 If satisfies section 149(6) &
(7) will be independent director

 SSD is not liable to retire by rotation  A person can be SSD of maximum 2 companies provided
 1 tenure of maximum 3 years these companies are not in competing business
 No association with company for next 3 years
Section 152 First Directors Other provisions
(Appointment of  Written in AOA  DIN is compulsory for a director
Directors)
 If not written, individual subscribers become the first directors  Appointed director to give his consent in DIR-2
 In case of OPC – the member becomes the first director  Company to file such consent with RoC in DIR-12
These directors to hold office until director(s) appointed in GM
Retirement by Rotation – Applicable only to PUBLIC company
i AOA may provide that ALL When to retire At AGM
directors to retire How many 1/3rd of those 2/3rd shall retire
directors to retire Note – In this case, nearest rounding off is done

CA HARSH GUPTA (I.G.P.) Appointment & Qualification of Directors

 ii Else, ≥ 2/3rd of TNOD shall retire Which director to
by rotation + should have been retire first
appointed in GM
Note – TNOD to exclude Independent
director
Note – For 2/3rd higher rounding off Who will fill such Retiring director himself or some other person may fill. Further
is done vacancy meeting may resolve NOT to fill the vacancy
Automatic re-appointment of retiring director
 If the vacancy is not so filled or it is not resolved not to fill the vacancy, meeting stands adjourned to the next week (same
day, time & place  if that day is a national holiday, then to the next succeeding day which is not a holiday)
 If vacancy is not filled or it is not resolved not to fill the vacancy at adjourned meeting  retiring director stands
automatically reappointed UNLESS
Resolution for his appointment was lost He is unwilling He is disqualified
Section 162 is applicable OR/ SR is required for his appointment as per provision of the Act
Section 153 Every person intending to become director must Section 154 CG to allot DIN within 1 month
apply for DIN in DIR-3
Section 155 No person shall obtain more than 1 DIN Section 156 Director must intimate his DIN to the company within 1
month
Section 157 Company to intimate details of DIN to RoC within Section 158 DIN must be mentioned in every return, information etc.
15 days
Section 159 For contravention of section 152, 155 & 156; - Imprisonment upto 6 months or fine upto INR 50,000
(Punishment) - If continuing one, further fine of INR 500/ day
Section 160 - Any person himself may apply for Conditions Deposit refunded if
(Candidature for directorship, or - 14 days’ notice before the meeting  Gets elected, or
directorship) - A member may propose him as director - Deposit of INR 1 lakh  Gets > 25% votes
Note - Section N.A. to a Private company & not No need of deposit is candidate
applicable in case of RETIRING DIRECTOR 1. In case of independent director
2. Director proposed by NRC
3. If no NRC, director proposed by Board
Section 161 (1) – Additional Director (2) – Alternate Director
 Authorised by AOA  Authorised by
 Appointed by Board - AOA or
 Hold office upto AGM - OR
 Appointed by Board
(3) – Nominee Director  Appointed to act as an alternate for a director outside India for ≥ 3
 Authorised by AOA months
 Appointed by Board  Existing director can’t act as alternate director for any director
 Appointed pursuant to some agreement or  Person shall be alternate director for only 1 director in the company
law  Alternate director for an Independent director must be independent as
(4) – Casual Vacancy well
 Casual vacancy of a director appointed in GM  Automatic re-appointment N.A. to alternate director
may be filled by Board at a MEETING  Hold office
 It is subsequently approved inimmediate next
- Upto tenure of original director
GM
- Original director returns to India } whichever is earlier
 Hold office upto the date the director whose
vacancy is filled would have held office
Section 162  2 or more directors shall not be appointed by a single resolution, unless approved without any vote being cast against it
(Single Resolution)
 If still appointed, the resolution shall be void
Section 163  AOA may provide for appointment of ≥ 2/3rd directors by proportional representation
(Proportional
Representation)  Appointment made once in every 3 years & casual vacancy filled u/s 161(4)
Section 164 164(1) 164(2)
(Disqualifications)
No person who is or has been a director of a company,
shall be re-appointed in the company or appointed in any
other company as a director for 5 years, if that company

 has not filed financial statements or annual

return for 3 continuous financial years
 has failed to repay 3D’s for 1 year
(Deposit, debenture, dividend)

Note – Any person newly appointed as director of company

mentioned above shall not incur the disqualification for 6
months
164(3)
Private company may, by its articles, provide for any other
ground for disqualification

CA HARSH GUPTA (I.G.P.) Appointment & Qualification of Directors

Section 165  Maximum directorships = 20 But, maximum 10 directorships in
(Number of
Directorships)  Section 8 & Dormant company - Public company or - Private company which is Holding or subsidiary of a Public
not counted in 20 company
Section 166
(Duties of a Act in accordance with AOA Act in good faith Exercise duties with due care
director) Shall not involve in conflicting interest No undue advantage Shall not assign his office
Section 167 Grounds for vacation
(Vacation of
office)  Disqualified u/s 164  Absent from BM  Act in  Fails to disclose interest u/s 184
But in case of 164(2), director shall vacate in for 12 months contravention
all companies, except in which default incurs of 184
 Disqualified by Court  Convicted for ≥ 6  Removed u/s  Ceases to hold office in Holding/
months 169 subsidiary/ associate pursuant to
which appointed
Section 168  Director may resign by giving a notice in writing to the Company + MAY forward a copy to RoC in DIR-11
(Resignation)
 Further, company shall also file DIR-12 with RoC + place the fact of resignation in next General Meeting
 Effective date of resignation is
Date on which notice is received by the company } whichever is later
Date, if any, specified in the notice
 Director to remain liable for past offences
 If ALL directors resign or vacate their office  promoter, else CG, shall appoint required number of directors

Section 169 A SPECIAL NOTICE (u/s 115) is required to Right of representation by Director being removed
(Removal)  Remove a director; or  Director has right to be heard at the meeting
 To appoint somebody else in his place  Further, he also has the right to make representation
 OR is passed for removal - Fact of representation shall be mentioned in the
 But to remove re-appointed Independent director, SR is notice
required - If received timely – also sent to every member
Filing of vacancy - If not received timely – must be read out at meeting
 A new director may be appointed at the same GM by - Provided it need not be sent/ read out if NCLT is
giving special notice satisfied that representation is being used to secure
needless publicity for defamatory matter
 If not so appointed, filled as casual vacancy
 Term – date upto which predecessor would have held
office
Section 170 Register of Director Every company shall maintain a Register containing particulars of director/ KMP +
(Register of their shareholding
Directors, KMP & Return of Particulars A return shall also be filed with RoC within 30 days of appointment or any change
their shareholding) taking place
Section 171 Right to inspect register u/s 170(1) - Member shall have right to inspect during business hours + can take extracts
(Members’ right to - Also, it should be open for inspection at every AGM
inspect) - If company refuses  RoC, on application, shall order inspection

Section 172 Residuary penalty for contravention of

(Punishment) this Chapter Fine
On whom
Minimum Maximum
- Company; and
INR 50,000 INR 5 lakh
- Every officer in default

CA HARSH GUPTA (I.G.P.) Appointment & Qualification of Directors

Section 173 Frequency of BM Video conferencing
(Board Meetings) - 1st meeting within 30 days of incorporation Directors may participate through video conferencing except
- 4 meetings in every calendar year + max. gap of 120 days for the following –
b/w 2 meetings
- Section 8 company Approval of annual financial Approval of Board's
2 meetings in every 6 calendar months statements report
- Following companies to hold 2 meetings in every 6 calendar Audit committee meeting to Approval of prospectus
months + min. gap of 90 days consider financials
Approve merger, demerger, etc.
Small Dormant
Note – If quorum physically present, remaining director can
OPC Start-up participate through video conferencing even for these businesses
Notice

Section 174 For section 8 company

(Quorum) 1/3rd of its total
whichever 8 members, or
strength, or
2 directors
} is higher 25% of total strength } whichever is
less
BUT ≥ 2 members

If directors fall below quorum If interested directors < Meeting adjourned for the want of quorum
1/3rd of total strength - Unless AOA specifies, adjourned to next week,
continuing director may continue to act
only for Non-interested directors same day, same time & place
- Increasing the directors to quorum, or (being ≥ 2) shall be quorum - If national holiday, to next succeeding day (not
- Calling GM being a holiday)
Section 175  Resolution to be circulated in draft to ALL the directors at  Resolution to be moved at MEETING if 1/3rd directors
(Resolution by their registered address require the same
Circulation, RBC)
 Approved by MAJORITY of directors ENTITLED to vote  Resolution passed by RBC to be noted at subsequent
meeting
Section 176 Past acts of directors not to be invalid if it is subsequently However, once notice, then future acts will not be valid
(Defects in notice that appointment was invalid because of
appointment - defect - disqualification - termination - AOA
Section 177 Companies required to appoint Audit Committee Composition of Audit Committee
(Audit committee  Min. 3 directors  I.D. forming majority
& Vigil Mechanism)
Similar to that prescribed for Independent director (I.D.)  Majority members + Chairman  must be able to read
& understand financials
Functions/ Roles of Audit Committee Powers of Audit committee
 Call comments of auditor on internal control, scope of
Appointment & Monitor auditor’s Examine audit, financial statement etc.
remuneration of Auditor independence financials &  Discuss related issues with auditor or management
audit report
End use of funds raised Scrutinize inter- Valuation  Authority to investigate
in Public offer corporate loans  Authority to seek any professional advise

Internal financial Approve RPT*

controls Transactions other than 188
may be referred to Board
*Note – Directors can enter RPT ≤ 1 crore and get it subsequently
ratified by Audit Committee
*Note – No approval for RPT with WOS (other than transactions
referred in section 188)
Vigil mechanism – Formed by following companies Objectives
 Listed; or  Mechanism for directors/ employees to report concerns
 Accepting Public deposits; or  Safeguard against victimisation
 Borrowings from Banks/ FI > INR 50 crore  Direct access to Chairman in exception cases

Section 178 NRC Composition of NRC Functions of NRC

Companies required to appoint Audit Committee  Min. 3 Non-executive  Identify persons qualified to become
directors  ≥ 50% I.D. director
 Chairperson of company  Lay down criteria for qualifications &
NRC Similar to that prescribed for I.D. & Audit independence
can be member but shall
Committee not chair NRC  Formulate remuneration policy
 Policy disclosed in Board’s report
SRC
Constituted by companies Headed by Chairperson being Non-executive Objective
having >1,000 security-holders director and other members as decided by Board Resolving grievances of security-holders

CA HARSH GUPTA (I.G.P.) Meetings of Board & its Powers

Section 179  Powers of Board are co- Following powers to be exercised only at Board MEETING
(Powers of Board) extensive with that of the
company (a) Making calls on shareholder
 Power does not exercise (b) Authorising Buy-back
powers reserved for GM (c) Issue securities
(d) Borrow monies
Exemption to Banking (e) Invest funds
company Can be delegated
(f) Grant LGS
- Accepting deposits
repayable on demand (g) Approve financials & Board report
(h) Diversify business
- Placing deposits with
other banks (i) Approve amalgamation, merger etc. Note – For O/D & C/C, borrowing
(j) Approve takeover means availing such facility &
- Taking loans from other not their day-to-day operation
banks (k) - political contribution – Appoint/ remove KMP
- appoint internal or secretarial auditor
Section 180 Special Resolution is required for Safeguard
(Restriction on
Powers of Board)  Buyer who acquired undertaking in good faith
 Sale or lease of undertaking in normal course of
Not applicable to business
Private company  Debt incurred in excess of prescribed limit will be
valid  if lender gave the loan in good faith

Section 181  Donation ≤ 5% of Average Net profits of past 3 years – Board resolution
(Charitable
donantions)  > 5% Average Net Profits of past 3 years - Ordinary Resolution
Section 182 Cases covered Companies excluded Limit
(Political Donation to Political party  Any purpose Max. 7.5% of Average Net Profits for last 3 years 
contribution)  Government
company by passing resolution at BM
Donation to Any person  Political purpose  Company been in Note – This limit has been removed by FA, 2017
existence < 3 years
Section 183  Board can contribute ANY amount to National Défense Fund or any other fund approved by CG for national defence
(NDF)
Section 184 (1) – Disclosure of interest by Director (2) – No Participation by director if interest in a
(Disclosure of Sub- Applicability Every director shall disclose his concern contract/ arrangement
interest by section or interest in any body corporate or
Director) (1) Public +  With a Body corporate in which such director holds
association in > 2% or is a Promoter, manager, CEO
Private Co.  First BM
(2) Public Co.  With other entity in which such director is partner,
 First BM every in FY owner or member
 Change in disclosures If contract still entered  voidable at the option of
the company
Section 185 Excpetions to sub-section (1) & (2)
(LGS to Directors 185(1) 185(2)
etc.) LGS - NOT ALLOWED LGS – ALLOWED if
 SR passed + Loand to MD/  Condition of service; or
WTD  Scheme approved by SR
 used for principal business
1. DIRECTOR of Co. 1. PRIVATE COMPANY of which such LGS in ordinary Minimum interest charged as
Director of Holding Co. director is Director or member course of business per 1/ 3/ 5/ 10 years
Partner or Relative of 2. BODY CORPORATE – director government security
such director together with other holds ≥ 25%
of voting power LGS to WOS Used for principal business
activities
2. FIRM in which such 3. BODY CORPORATE – directors of
director or relative is which accustomed to act
GS to subsidiary  Against loan taken from
partner bank or financial
institution
Note – Prescribed Private companies are exempt from this section  Used for principal business
activities
Note – Sale of flat on instalment basis to a director
is NOT a loan (Fredie Ardshire Mehta)

Section 186 Maximum 2 layers of Investment Co. is allowed

(LGSI)
Exception –
 Acquiring any company outside India where laws of
such country allows more layers
 Subsidiary can have investment subsidiary if any law
requires

CA HARSH GUPTA (I.G.P.) Meetings of Board & its Powers

 Conditions to make LGSI
1. Unanimous Resolution 3. PFI approval if term loan subsisting
2. If exceeds below limit – SR (No approval if within limit + no default)
4. ROI ≥ 1/ 3/ 5/ 10 year GOI securities’ yield
- 60% of its (PSC + FR + SP) whichever is 5. No default of deposits
or } MORE 6. Register should be maintained
- 100% of its (FR + SP)
Exemption from ALL the above conditions Exemption from passing SR
 LGSI by banking, insurance, Housing finance company
 LGS by company engaged in financing or providing  LGS to WOS or JV
infrastructure facilities  Investment in securities of WOS
 Investment by NBFC (principal business being investment)
 Investment by investment company
 Rights issue

Section 187  All investments made by company shall be in its own name Exceptions
(Investment in own  However, to meet statutory limit, shares in subsidiary can be  Securities given to bank to collect dividend/ interest
name) held in the name of nominee  Securities given to bank to facilitate transfer
 Depositing securities as a security against loan
 Holding investments in Demat form
Section 188
(RPT) Related Party Transactions covered

Director/ KMP or his Relative

Firm Where Director/ Manager/ Relative is Partner a Sale, purchase, supply of GOODS
Private Co. Where Director/ Manager/ Relative is b Sale, purchase or PROPERTY of any kind
Director/ Member c Leasing of PROPERTY of any kind
Public Co. Where Diirector/ Manager d Availing or rendering any service
 is a director; and e Appointing AGENT for a-d
 Holds with relative > 2% PSC f Office or Place of Profit (OPP)
Body Corporate Whose Board or MD or Manager is g Underwriting of securities
accustomed to act according to Director/
Manager CONDITIONS
Any Person On whose advise our Director / Manager is  Board resolution at MEETING required
accustomed to act
Body corporate Holding/ Subsidiary/ Associate/ Co-  If RPT exceeds below limits, OR also required
which is subsidiary/ Investing/ Venturer company  Interested member shall not participate except in Private
Co.
Director (other  of Holding company, or
than ID) + KMP  Interested member may participate if ≥ 90% members
 his relative are relatives of promoters or related parties
Lower of -
a+e - 10% turnover, or
Exception - INR 100 crore
 Section not applicable on transactions entered at ALP Lower of
 OR is not required in case of RPT with WOS whose accounts are b+e - 10% NW, or
consolidated - INR 100 crore
Lower of
Consequences of violation - 10% turnover, or
c - 10% NW, or
 Contract is voidable at the option of the Board - INR 100 crore
 If contract entered with a director or employee  he shall Lower of -
make good the loss d+e - 10% turnover, or
- INR 50 crore
f INR 2,50,000
g 1% NW
Section 189  Every company shall maintain a register for contracts to  Register is open to inspection by any MEMBER
(Register of
contracts in which
which 184(2) & 188 applies  Also, register is produced at every AGM
director interested)  Register shall be placed in next BM & signed by ALL directors Exceptions
Nothing applies to –
 Every director/ KMP shall within 30 days of his appointment  Sale/ purchase of goods & services ≤ INR 5 lakh in a FY
or relinquishment disclose particulars u/s 184(1)  Banking company for collection of bills

Section 190 Every company to keep at registered office –  The contract is open to inspection by any member
(Employment  Contract of service with MD/WTD  if it is in writing,  Section is not applicable to a Private company
contract with MD
or WTD)  Else, a written memorandum setting out the terms
Section 191 No director is entitled to any compensation for loss of office
resulting from Disclosed to members & their approval has been obtained
 Transfer of undertaking or property, or unless in GM
 Transfer of shares Note – Nothing affects payment to MD/ WTD/ Manager

CA HARSH GUPTA (I.G.P.) Meetings of Board & its Powers

Section 192 A company AND director of the company/ holding/ subsidiary/ associate/ Consequences of contravention
(Non-cash a person connected shall not enter into non-cash transactions unless – Contract is VOIDABLE at the option of the company
transactions  Prior approval in GM is obtained, & unless –
involving directors)
 If director of Holding Co. – approval in GM of Holding Co. also required Restitution not possible + Co. is indemnified; or
 Rights acquired bona-fide for value
Section 193  Where OPC enters into contract with sole member & it is not in writing then  Ensure terms contained in memorandum or
(Contract by OPC) recorded in first BM
 Nothing applies to transactions entered in the ordinary course of business
Section 194 ---- Omitted ----
Section 195
---- Omitted ----

CA HARSH GUPTA (I.G.P.) Meetings of Board & its Powers

Section 196  No company shall appoint MD as
(Appointment of well as Manager
MD/ WTD/
Manager)  Tenure – 1 term of 5 years
(cooling period - 1 year)
Procedure for Appointment
1 Resolution at BM
2 Approval by OR at next GM
3; or CG approval; or
4 Follow Schedule V
Note - File MR-1 within 60 days
Disqualifications
 Min. age  21 years; Max. age  70 years
(can appoint if > 70 years by passing SR)
 Undischarged insolvent + adjudged insolvent
 Suspended payment to creditors or made compromise with them
 Convicted for > 6 months for any offence
Schedule V
 Not subject to imprisonment or fine > INR 1,000 under the prescribed 16 Acts
 Not detained for smuggling
 Min. age 21 years; Max. age – 70 years (can appoint if > 70 years by SR)
 If appointed in more than 1 company  comply with section V Part II of Schedule V
 Resident in India

Section 197 Limit to director’s salary
(Director’s
remuneration)
Conditions
Overall
1 MD/ WTD/ Manager
> 1 MD/ WTD/ Manager
Non-executive director(s)
 If MD/ WTD there
 If MD/ WTD not there
Net Profit – Computed u/s 198 w/o
deducting director’s remuneration
Option 1 – CG approval
Option 3 – Part 111 of
Section II of Schedule V
Option 4 – Rule 7(2)
Note – Limits can be doubled by passing SR
Note - Salary is exclusive of any sitting Mode of paying remuneration
fees  Monthly remuneration; or
% of Sitting fees  % of Net profits; or
Net
Profits  Max. which Board can prescribe is  Mix of both
11% INR 1 lakh per meeting
5%  Sitting fees to I.D. and Woman Other points
10% director can’t be less than others  I.D. not entitled to ESOP
 Director is liable to refund any excess
1% Note – Salary includes remuneration salary (Co. can waive it by CG approval)
3% payable in any other capacity, other  Listed Co. to disclose ratio with median
than salary in Board’s report
- Services of professional nature +  Insurance premium paid for indemnity
requisite qualification is there
- Guarantee commission insurance included in salary  only if
director is proved guilty
Options to pay salary in case of NO or Inadequate profits
Option 2 – Part II of Section II of Schedule V
Part A Part B
 Functioning in professional capacity
Effective capital # Yearly remuneration
< 5 cr 60 lakhs  No direct or indirect interest in share capital
≥ 5 cr but < 100 cr 84 lakhs of Co./ Holding/ Subsidiary
≥ 100 cr but < 250 cr 120 lakhs (can hold upto 0.5% pursuant to ESOP etc.)
≥ 250 cr 120 lakhs+ 0.01% of  No direct or indirect interest in Director or
excess capital Promoter of Co./ Holding/ Subsidiary in last 2
years
 Possess graduate level experience with
expertise & specialised knowledge

i. Payment approved by NRC or Board, as the case may be

ii. No default in debts/ debentures/ interest for 30 days in preceding FY  if defaulted, obtained
approval of creditor(s) for payment of remuneration
iii. Part A – OR/ SR is passed, as the case may be
Part B – SR is passed
iv. Requisite disclosures made in Explanatory Statement

# Meaning of Effective Capital

Paid-up share capital xxx
(excluding share application pending allotment)
+ Share premium account xxx
+ Reserves & Surplus xxx
(excluding revaluation reserve)
+ Long term loans & deposits payable after 1 year xxx
(excluding working capital loans, O/D etc.)
(-) Investments (except in case of Investment company) (xxx)
(-) Accumulated losses (xxx)
(-) Preliminary expenses not written-off (xxx)
Effective Capital xxx

Section 198 In computing Net Profits 1 – Added 2 – Not added

(Calculation of 1 Added  Bounties & subsidies  Premium on issue or sale of shares or debentures
Profits) 2 Not added  Profit on sale of forfeited shares
3 Deducted  Profit on sale of undertaking
4 Not deducted  Profit on sale of fixed assets of capital nature (unless in
ordinary course of business)
 Change in carrying amount of asset/ liability

CA HARSH GUPTA (I.G.P.) Appointment & Remuneration of Managerial Personnel

 3- Deducted 4 – Not deducted
 Working charges, director’s remuneration  Income-tax
 Bonus or commission  Compensation or damages paid voluntarily
 Tax on abnormal profits,  Loss of capital nature
 Tax on business profits for special reasons  Change in carrying amount of asset or liability
 Interest on debentures, mortgages, loans & advances
 Repairs, donation to charitable funds
 Depreciation, compensation for legal liability
 Past losses, insurance & bad debts
Section 199 If company is required to re-state its financial statements due to Company shall recover excess remuneration from MD/
(Recovery of fraud or non-compliance WTD/ Manager/ CEO
remuneration)
Section 200 CG or Company may, while Certain factors to be considered while fixing limits, which inter-alia includes -
(CG or company giving approval, fix limits
may fix limit on on remuneration in cases Financial position of company Remuneration drawn in any other capacity
remuneration) of inadequate or no profits. Remuneration drawn from other company Professional qualifications & experience
Financial & operating performance in 3 FYs Relationship b/w remuneration & performance

Section 201 Every application to CG under this Before giving application, general notice to members shall be given + it shall also be
(Filing with CG) chapter shall be in Form MR-2 published and their copies are attached with the application

Section 202 A company may pay Non-eligibility Limits on compensation

(Compensation for compensation for loss of  Director resigns in case of reconstruction &
loss of office of office to MD/ WTD/ Manager, gets employed with reconstructed company Lower of average remuneration* for
MD/ WTD/ but NOT to any other director
 Director resigns in any other case - Remainder of his term; or
Manager) - 3 years
 Vacation of office u/s 167(1)
 Company wound up due to default of director *Average remuneration means average
salary during the lesser of
 Director guilty of fraud or breach of trust
 Period of office; or
 He instigated in termination of his office
 3 years
Section 203 Following whole-time KMPs
(Appointment of mandatory in  Listed company; or
KMP)  MD or CEO or Manager or WTD  Public company Whole-time CS  Any company having
having PSC ≥ INR 10 mandatory in PSC ≥ INR 5 crore
 CS
crore
 CFO
Chairperson + MD/ CEO Conditions for appointment Casual Vacancy
Same person shall not be Chairperson & MD/ CEO, unless  Every whole time KMP appointed by Vacancy of whole-
 AOA provides; or resolution at BM time KMP shall be
filled up by Board
 Company carries on single business  He shall not hold office in more than one within 6 months
company  except subsidiary company
Further above restriction N.A. for following companies, if
into multiple businesses & has CEOs for each business  A person may be appointed as MD, if he
is MD/ Manager of one other company 
Public companies having with UNANIMOUS resolution with consent
- PSC ≥ INR 100 cr; and of ALL the directors present
- Turnover ≥ INR 1,000 cr

Section 204 Following companies shall get Secretarial Duty of Company

 Listed company
(Secretarial Audit) audit done and annex secretarial audit  Company shall give assistance to CS in
report to Board’s report.  Public Co. having practice
- PSC ≥ INR 50 cr  Explain any qualifications or
Note – Secretarial audit can be done by
only CS in practice. - Turnover ≥ INR 250 cr observation in Board’s report
Section 205
(Functions of CS)  Report to Board about compliance  Provide needed guidance to Board  Obtain requisite approvals
with Act, rules etc.
 Ensure compliance with Secretarial  Convene meetings & make minutes  Represent company before various
Standards authorities
 Assist Board in conduct of affairs  Ensure good corporate governance  Do such other duties assigned

CA HARSH GUPTA (I.G.P.) Appointment & Remuneration of Managerial Personnel