Is managerial remuneration section 97?
Managerial remuneration is not section 97. Section 97 lets the Tribunal, on a member’s application, call or direct the calling of a general meeting when the company has defaulted in holding its annual general meeting. The limit on what a public company may pay its directors and its manager is section 197.
Which section is which?
Section 97 is a remedy for a missed meeting. It does not set a percentage of profit, a sitting fee, or a refund of excess pay. Using it as the remuneration section mixes two duties. The meeting the Tribunal may call is the annual general meeting the company failed to hold.
Where is the remuneration limit?
Section 197 limits the remuneration a public company may pay its directors, including a managing director and a whole-time director, and its manager, to 11 percent of the net profits of that financial year, unless the company in general meeting authorises more, subject to Schedule V. A private company is outside that limit. Sitting fees sit outside the percentage. The percentages, the refund of an excess, and the penalty of ₹1 lakh on the person and ₹5 lakh on the company are on the remuneration page.
Frequently asked questions
Four questions cover the section number, a private company, Central Government approval, and the penalty.
Does section 97 cap a director’s pay?
No. Section 97 is about calling a meeting. The cap on a public company’s managerial remuneration is section 197.
Does section 197 apply to a private company?
No. The percentage limit is a public-company limit. A private company is outside it.
Is the old Central Government approval still required?
No. From the Companies (Amendment) Act, 2017, pay above the percentage is authorised by the company in general meeting, subject to Schedule V, not by a fresh application to the Central Government.
What is the penalty for a default?
Section 197(15) imposes a penalty of ₹1 lakh on the person in default and ₹5 lakh on the company. The detail of the percentages is on the remuneration page.
Sources
Calling a meeting in default is section 97 of the Companies Act, 2013. Managerial remuneration of a public company is section 197. Net profits are section 198.