The remuneration payable to the directors of a company, including any managing or whole-time director, shall be determined, in accordance the provisions given below either by the articles of the company, or by a resolution ( special resolution if the articles so require ), passed by the company in general meeting and the remuneration payable to any such director determined as per the said provisions shall be inclusive of the remuneration payable to such director for services rendered by him in any other capacity. However, any remuneration for services will not be so included if the services are of a professional nature and in the opinion of the Central Government, the director possesses the requisite qualifications.
A director may receive remuneration by way of fees for attending each meeting of the Board or of any committee thereof ( Sitting Fees ).
A director who is in whole time employment of the company or a managing director may be paid remuneration either by way of a monthly payment or at a specified percentage of net profits of the company or partly by one and partly by the other. Such remuneration cannot exceed 5 % of the net profits of the company, except with the approval of the Central Government in case of one director and 10 % for all such directors.
The total managerial remuneration payable by a public company or a private company which is a subsidiary of a public company to its directors and its manager in any financial year must not exceed 11 % of the net profits of the company calculated in accordance with the provisions of section 349, 350 and 351.
In the case of a director who is neither in the whole-time employment of the company nor a managing director may be paid remuneration either by way of a monthly, quarterly or annual payment with the approval of the Central Government or by way of commission if the company by special resolution authorises such payment. Such special resolution to in sub-section (4) shall not remain in force for a period of more than five years; but may be renewed, from time to time, by special resolution for further periods of not more than five years at a time. Remuneration payable to such directors cannot exceed :-
if the company has a managing or whole-time director or a manager, one per cent, of the net profits of the company;
in any other case, three percent of the net profits of the company.
If any director earns remuneration from a company in excess of the above limits without prior approval of the Central Government, he shall refund the excess to the company and until such repayment, hold the money in trust with him.
The Company cannot waive recovery of such sum due from the director unless approved by the Central Government.
No approval of the Central Government is required in case the remuneration is within the limits mentioned in Schedule XIII to the Companies Act, 1956.
No director of a company who is in receipt of any commission from the company and who is either in the whole-time employment of the company or a managing director shall be entitled to receive any commission or other remuneration from any subsidiary of such company.
The above provisions pertaining to remuneration do not apply to a private company unless it is a subsidiary of a public company.