Public companies will no longer require government approval for paying salaries beyond a certain threshold to their managerial personnel, according to a communication.
Easing the norms, the Corporate Affairs Ministry has amended provisions under Companies Act, 2013 in this regard. This will be applicable for public companies and not private companies.
Under the Companies Act, 2013, there are public as well as private companies. Generally, those having more than 200 members are classified as public companies and they have to follow stricter corporate governance norms.
There are more than 70,000 public companies, as per official data.
The approval of the “central government shall no longer be required for the payment of remuneration to managerial personnel (in excess of 11 per cent of the net profit of a company),” the ministry said in a release Thursday.
Now, such payments can be approved by a company’s shareholders through a special resolution.
In case a company has defaulted in payment of dues to any bank, financial institution or non-convertible debenture holders, approval of the entity concerned would be required before the remuneration proposal is put up to the shareholders.
The ministry said the move is in pursuance of the policy of minimum government-maximum governance and providing ease of doing business to the law-abiding corporates of this country.
“With the issue of the notification, all pending applications submitted to the Ministry for approval of proposals for payment of managerial remuneration in excess of the limits laid down, would automatically abate and companies are free to obtain requisite approvals for those proposals, from the shareholders within one year,” the release said.