MCA Update: Increased Remuneration Limit for Companies with No or Inadequate Profit

📅 Amendment Dated: 12th September 2016 

🔍 Source: Ministry of Corporate Affairs (MCA) 

📜 Act: Companies Act, 2013 – Schedule V Amendment

What’s the Update?

The Ministry of Corporate Affairs (MCA) has notified a key amendment to Schedule V of the Companies Act, 2013, allowing companies that have no profit or inadequate profit to pay higher remuneration to their managerial personnel without Central Government approval, subject to certain limits.

Applicability

Applicable To: Public Companies 

Not Applicable To: Private Companies (No such restriction)

New Limits of Remuneration (Without Central Government Approval)

If a company has no or inadequate profits during any financial year, it can still pay remuneration as per the following structure:

Effective Capital (₹)	Maximum Yearly Remuneration (₹)
Negative or less than ₹5 crores	₹60 lakhs
₹5 crores to less than ₹100 crores	₹84 lakhs
₹100 crores to less than ₹250 crores	₹120 lakhs
₹250 crores and above	₹120 lakhs + 0.01% of effective capital over ₹250 crores

Special Resolution Benefit

 If the remuneration is approved through a special resolution passed by shareholders, 

➡ The above limits shall be doubled.

Why This Matters

●       Encourages retention of top leadership even in tough financial times.

●       Provides relief for public companies struggling to show profitability.

●       Simplifies compliance by eliminating the need for central government approval.

Key Takeaway

●       Remuneration can be paid based on effective capital, not profits.

●       Shareholder empowerment through special resolutions.

●       Private companies remain unaffected by these limits.