×

FREE CONSULT

Learn More Services The Corporate & Financial Sector Our presence in Know About Our Team CA, CS, Corporate Lawyers & Others Our specialized team of Learn More About Us Client's Ever Changing Requirements One stop solution for

Integrity

Our essence is rooted in being honest and straight forward. We advise and advocate what we truly believe.

Wisdom

Our team and collective efforts allow free flow of information and knowledge from top to bottom and vice versa.

Togetherness

Teamwork is rooted in affluence DNA and we very much acknowledge the outcome of team work.

Confidentiality

We firmly believe that Confidentiality is the cornerstone of our Profession and strive to maintain it to the fullest possible extent.

Simplicity

We believe that the simplest solution is the best one.

Commitment

We understand only our profession and we are devoted to it. We are cent percent committed to the delivery of quality services to our clients.

About

Affluence

Non-executive Directors are directors who are not in whole time employment of the company. These directors are remunerated by payment of sitting fees, commission on profits and fees for rendering professional services.

  1. How much sitting fees can be paid to non-executive directors?

With respect to payment of sitting fees Companies Act, 2013 states the that maximum sitting fee that can be paid to non-executive directors is Rs 100,000 per meeting. Meetings here include all types of committee meetings wherein non-executive directors are comprised of.  

  1. What is the maximum amount of remuneration that can be paid to non-executive directors of the Company?

According to Section 197 of the Act, except with the approval of the company in a general meeting by passing a special resolution, the company can pay remuneration to its non-executive directors as follows:

  • 1% of the net profit of the company, if there is an existing managing or whole-time director or manager. Here “1% of the net profit” means for all non-executive directors of the company (whether independent or not).
  • 3% of the net profit in any other case i.e. where there is no managing or whole-time director or manager. In situation is very rare, where all the directors are non-executive directors. Here “3% of the net profit” means for all non-executive directors of the company (whether independent or not). The above percentages do not include sitting fees. Such payment is excluded from the calculation of the remuneration to directors.
  1. Can the percentage of above referred remuneration be changed?

With the amendments introduced by the Companies (Amendment) Act, 2017, with the approval of shareholders in a general meeting by special resolution, the above percentages can be changed.

  1. What are various approvals required for payment of remuneration to non-executive directors?

For payment of remuneration in the form of commission as a percentage of profits special resolution is required to be passed by the Company. Where the Company has defaulted in payment of dues to any bank or public financial institution or non-convertible debenture holders or any other secured creditor, the prior approval of the bank or public financial institution concerned or the non-convertible debenture holders or other secured creditors, as the case may be, shall be obtained by the company before obtaining the approval in the general meeting.

  1. Whether remuneration can be paid to non-executive directors on monthly basis or only on yearly basis after net profits are calculated?

Section 197(6) of the Act provides that a director (i.e. any director–executive director or non-executive director) or manager may be paid remuneration either by way of a monthly payment (i.e. salary) or at a specified percentage of the net profit of the company (i.e. commission) or partly by one way and partly by the other (i.e. combination of both).

  1. Whether remuneration payable to non-executive directors is subject to some conditions?

Public limited companies are required to do performance evaluations of the entire board of directors. Board of Directors shall do an evaluation of individual directors, by ensuring that the director being evaluated being absent. The above referred remuneration in terms of percentage of net profit is to be given based on the result of evaluation of board of directors.

  1. Whether Remuneration is payable to non-executive directors in a loss-making company?

Till the Companies (Amendment) Bill, 2020 [now, Companies (Amendment) Act, 2020], there was no specific provision in the Act to pay non-executive directors by way of commission, in the event of loss or inadequate profits of the public company.  Section 197(3) of the Act was amended by the Companies (Amendment) Act, 2020, wherein a company having no profits or inadequate profits, can pay to all its directors (executive and non-executive directors) by way of remuneration any sum in accordance with the provisions of Schedule V to the Act.

It is important to note here that even in the case of inadequate profits or losses, the sitting fees paid by the company is not a part of the remuneration to directors.

The Ministry of Corporate Affairs (MCA) has amended[1] Schedule V of the Companies Act, 2013, in Part II, under the heading—“Remuneration” and allowed companies to pay remuneration to non-executive directors or independent directors. The limit of yearly remuneration payable to such directors shall not exceed prescribed amount. The maximum amount of remuneration depends upon the effective capital of the company. Where in any financial year during the currency of tenure of non-executive directors or independent directors, a company has no profits or its profits are inadequate, it may, pay remuneration to such director not exceeding, the limits given below:

Where the effective capital (in rupees) isLimit of yearly remuneration payable shall not exceed (in rupees) in  case of non-executive directors or independent directors
Negative or less than 5 crores.12 lakhs
5 crores and above but less than 100 crores.17 lakhs
100 crores and above but less than 250 crores.24 lakhs
250 crores and above.24 lakhs plus 0.01% of the effective capital in excess of Rs 250 crores.
  1. Whether remuneration in terms of percentage of net profit is required to be given at the end of the financial year or can be given during the financial year too?

Remuneration that is based on net profits is made once the accounts are adopted at the annual general meeting. Special Resolutions approving payment of remuneration once passed are valid till they are rescinded.

  1. Whether a single approval can be obtained for payment of commission to all NEDs/IDs or separate approval for every director is required?

A single approval can be obtained for payment of commission to NEDs/ IDs as the remuneration is paid in accordance with the remuneration policy of the company which is framed in general for all the directors. There is no need to take separate approval for payment of remuneration to each director. The remuneration policy may have a general formula or matrix for distinguishing between the directors based on their contributions.

  1. Whether prior approval of shareholders is required for payment of remuneration to IDs?

It is not necessary to take prior approval of shareholders for payment of remuneration to IDs. Post facto approval may be taken and the accounts may carry a note specifying that the shareholders’ approval is pending, and if the same is not approved, the directors will be liable to refund the amount not so approved.   

General Practice

MCA vide it’s amendment in 2021 to schedule V made it applicable to non executive directors. The amended version of schedule V now allows companies to pay remuneration to non executive directors in case of inadequate profits or losses. Even if the law allows such payment, serious questions are raised on the payment of remuneration to directors in such cases. 

Nowadays Companies have to disclose the median remuneration of directors as compared to it’s employees in the directors’ report. With this matrix of disclosure, it becomes easy to identify imparity in the remuneration policy of the Company.

It is more difficult to pay remuneration in listed entities under the above scenarios. 

Allowing payment of remuneration to non executive directors in case of losses or inadequate profits can be helpful to bring in new talented directors to help grow the business. But if a profit making company goes into losses and then management proposes to pay remuneration to non executive directors who are basically not in full-time employment would raise questions on companies’ sustainability.

Remuneration packages for directors are framed by management. Companies need to keep in mind that remuneration packages shall sufficiently provide justification as to why they want to remunerate directors including non-executive directors in such difficult times. 

Suppose this is not clearly stated then the proposal of remuneration might be strongly assailed by members. This would be considered disrespect or defaming the image of directors.

So companies need to be careful while drafting remuneration packages. 

P.S: To follow …. Series 3: Remuneration paid to Directors of the Listed Entity

Disclaimer: This article provides general information existing at the time of preparation and we take no responsibility to update it with the subsequent changes in the law. The article is intended as a news update and Affluence Advisory neither assumes nor accepts any responsibility for any loss arising to any person acting or refraining from acting as a result of any material contained in this article. It is recommended that professional advice be taken based on specific facts and circumstances. This article does not substitute the need to refer to the original pronouncement

Our Expertise

Our Services

  • 01
    Valuation

    Valuation opinion requires the right blend of analysis, experience and professional judgement. Our team has a Registered Valuer as required under

    Learn More
  • 02
    Due Diligence

    We provide financial, tax and corporate law due diligence support to our clients for inbound and outbound transactions.

    Learn More
  • 03
    ESOP

    ESOPs are one of the important tools to attract and retain employees and have long term career with the organization.

    Learn More
  • 04
    RBI / FEMA Compliance

    There are several compliances specified under FEMA for Indian Companies having FDI and ODI (Indian entities having investments in overseas Joint Venture

    Learn More
  • 05
    NBFC Registration and Compliances

    We carry experience of 15 years for registration of the NBCF with the RBI or carry out the process for change in management and control of the NBFC.

    Learn More
  • 06
    Fintech

    FinTech Companies are broadly categorized into digital payments or digital lending Companies. At Affluence,

    Learn More
  • 07
    Foreign Entities

    India has emerged as one of the most attractive destinations not only for investments

    Learn More
  • 08
    Company Secretarial Compliances

    We provide the entire gamut of Corporate Law Services, essential in rapidly changing regulatory and corporate environment.

    Learn More
  • 09
    SEBI Registration and Compliances

    SEBI plays an important role in regulating all the players operating in the Indian capital markets. It attempts to protect the interest of investors and aims at

    Learn More
  • 10
    Stressed Asset Resolution under IBC

    We provide advisory and support services to the corporates/other entities, devising and structuring solutions for stress mitigation in their enterprises/units.

    Learn More
  • 11
    Initial Public Offer

    On the journey of transformation of a private company into a public company, success depends a great deal on a coordinated team

    Learn More
  • 12
    Direct Tax

    The efforts of any management in modern business environment are towards enhancing a shareholder’s value. The taxes (both direct and indirect) and

    Learn More
  • 13
    Indirect Tax

    We at Affluence, adopt a comprehensive approach for implementation and compliances related to the GST and with an object to offer seamless services to our clients listed below.

    Learn More
  • 14
    Accounts Outsourcing

    In the fast-changing environment, procuring and retaining skilled staff is a challenge. Specially in the case of SMEs, in the absence of accounting manual

    Learn More
  • 15
    Risk Advisory

    Today’s businesses across the globe increasingly seek better decision-making and stronger internal controls in order to attain greater shareholder value.

    Learn More
  • 16
    Startup and MSME Advisory

    ‘Startup India’ is a flagship initiative of the Government of India, intended to catalyze startup culture and build a strong and inclusive ecosystem for innovation and

    Learn More
  • 17
    Assurance

    Assurance and accounting services are directed towards supporting stakeholders such as lenders and investors. Our standardized

    Learn More
  • 18
    Directors Due Diligence

    Director stand in a fiduciary position with the Company and Director will be held liable if Director do not act diligently in discharging his/her duties.

    Learn More
We are Professional

Our Team

People are our greatest asset and we believe in our people. Our multi disciplinary team would always go that extra mile to ensure that all the client deliverables are prepared within agreed time frame to technical standards and presentational quality. Our success is greatly dependent on quality and performance of our people.

  • CA Nimish Khakhar

    Nimish Khakhar

    He is a fellow member of the Institute of Chartered Accountants of India. He has over 23 years of experience in Transaction (M &A) and Transaction Support Services (Vendor and Buyer side Due Diligence). His Portfolio includes both Brick and Mortar and Modern Trade Businesses. He has played key roles in a few large M & A transactions and is also been actively involved in advising Unicorns since the commencement of operations.

  • CS S. N. Baheti

    S. N. Baheti

    He is an Associate Member of the Institute of Company Secretaries of India. He has 42 years of work experience in banking and financial services (including 34 years in IDBI group), with a diversified work profile having all-round exposure to activities of Development Financial Institutions, Infrastructure Debt Fund (NBFC), Mutual Funds, Commercial Banking, NBFC-HFC, and Company Boards including MD and CEO positions and Directorships in large corporates. Presently handling assignments as Insolvency Professional. He has played a key role as RBI representative in the resolution of one of the largest NBFC transaction.

  • Sanjiv Kumar Sachdev

    Sanjiv Kumar Sachdev

    Banking professional with more than 36 years of experience in Bank and more than 25 years of experience in Project Evaluation and financing, Financial Restructuring, Resolution of Stress Accounts, Debt Syndication, Infrastructure projects, Relationship management & networking, Business development, Legal and contractual Documentation and Business Planning. During his tenure with the Bank, he had held important portfolio’s and was heading Large Corporate Group of the Bank. He also worked in Infrastructure Corporate Group for Northern Region. He was involved in various policy meetings for development of Infrastructure Projects organised by various Govt agencies and Indian Banks’ Association. He has been Chairing many consortium meetings of Lenders for Debt Syndication as well as Resolution of Stress Assets.

  • CA Dwiresh Oza

    Dwiresh Oza

    He is having 27 years of extensive professional experience in Corporate Finance, Project Finance, Private Equity, Public/Rights Issues, Due Diligence, Corporate Debt Restructuring (CDR), ERP implementation, 50:50 International Joint Venture, Closely held as well as Listed Manufacturing Accounting, Statutory/Internal/Tax Audit and knowledge of IFRS. Have worked for more than 10 years in Infrastructure, viz. Ports and roads. Have demonstrated the ability to work across teams and with the senior management and Board of Directors in achieving various strategic initiatives on a time-bound and structured approach.

  • CA Payal Gada

    Payal Gada

    She is a fellow member of the Institute of Chartered Accountants of India and has 18 years of post-qualification experience. She is a registered valuer with IBBI as Valuation Professional and for the last 8 years, she is working on financial modeling and fair value analysis across different industries for diverse purposes, including regulatory/compliance, investment, and financial reporting. Fair valuation across asset classes including but not limited to business valuation, intangible, ESOPs, convertible instruments, and other complex instruments.

  • CA Rashmi Dubey

    Rashmi Dubey

    She is an associate member of the Institute of Chartered Accountants of India. Over 6 years of post-qualification experience she has specialized in Risk Advisory. Her Risk Advisory experience includes internal audit, ICFR, designing of SOPs, corporate governance, enterprise risk management, internal audits.

  • CS Sachin Kotian

    Sachin Kotian

    He is a fellow member of the Institute of Company Secretaries of India. Over 15 years of experience, he has expanded his advisory and compliance services in respect of Companies Act/ SEBI / RBI / FEMA /NBFC and other Corporate Laws. Further, Research is his area of interest.

  • CS Rajeshri Kanojia

    Rajeshri Kanojia

    She is an associate member of the Institute of Company Secretaries of India with 10 years of experience in secretarial compliance and legal matters. Her forte is RBI and FEMA compliances and she is leading advisory and compliances practice of financial services which includes NBFC and Fintech Companies. Her LLB qualification gives her an edge to attend Corporate agreements and Corporate Laws.

  • CS Vinesh Mestry

    Vinesh Mestry

    He is an associated member of the Institute of Company Secretaries of India. His horizon for more than 7 years in the field of Corporate Law and adjudication-related matters before Regional Directors, NCLT. His LLB qualification gives an additional advantage in matters relating to Compounding, Mergers & Amalgamations before Regional Directors, NCLT & Other Regulatory Authorities.

  • CS Bhavesh Chheda

    Bhavesh Chheda

    He is an associated member of the Institute of Company Secretaries of India. He has experience of more than 8 years and focuses on BSE and NSE Listed Companies and SEBI and Corporate Governance related matters. He also supports the compliance team in respect of Companies Act / RBI / FEMA / Corporate law.

  • CS Tanvi Shah

    Tanvi Shah

    She is an associate member of the Institute of Company Secretaries of India. Over 5 years of post-qualification experience, she focuses on Compliances of Companies Act/RBI/ and NBFC.

  • CS Karishma Parmar

    Karishma Parmar

    She is an associate member of the Institute of Company Secretaries of India. Her interest is in Compliances of Company Law/RBI and NBFC.

  • CA Ambarish Sodha

    Ambarish Sodha

    He is a fellow member of the Institute of Chartered Accountants of India. Over 43 years in direct tax litigation and tax advisory services, he appears before first and second appellate authorities. Over and above Profession, he is actively engaged in several social causes including promoting girls’ education in rural areas.

  • CA Payal Khakhar

    Payal Khakhar

    She is a fellow member of the Institute of Chartered Accountants of India. She has experience with over two decades. She heads indirect tax practice that covers regular GST compliances, GST reviews, and advisory services across different sectors.

  • CA Tejas Sodha

    Tejas Sodha

    He is a fellow member of the Institute of Chartered Accountants of India. He handles Direct tax litigation and compliance for over 12 years and regularly appears before first and second appellate authorities. He advises NRI on direct tax and withholding tax matters. His involvement in complex tax structuring has been appreciated by the Clients.

  • CA Dipesh Sangoi

    Dipesh Sangoi

    He is a fellow member of the Institute of Chartered Accountants of India. He heads Assurance practice and handles listed as well as unlisted companies and MNCs over the last 15 years. He manages Statutory Audits, Bank Audits - Central Statutory and Branch Audits, and Certification work for obtaining Bank Finance and certificates required for Public Issues.

  • CA Payal Doshi

    Payal Doshi

    She is a member of the Institute of Chartered Accountants of India. Her 10 years of experience is channelized towards Statutory Audits of Listed as well as unlisted entities and Tax Audits and Certification work.

  • CA Viral Shah

    Viral Shah

    He is a member of the Institute of Chartered Accountants of India. He has experience of more than 7 years and he is involved in Statutory Audits of Listed as well as Unlisted entities and Tax Audits and Bank Audits.

  • CA Ritesh Jain

    Ritesh Jain

    He is a member of the Institute of Chartered Accountants of India. He is engaged in compliance and management support functions. His industry experience contributes significantly to his delivery.

🤞 level up your inbox!

Subscribe to our newsletter for a dose of inspiration, helpful tips.