Companies free to decide managerial salaries: MCA

New Delhi: In a bid to further improve Ease of Doing Business (EoDB) in the country, the Ministry of Corporate Affairs (MCA) on Thursday said companies will no longer require government approval to decide salaries of their managerial staff.

"From September 12, 2018 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 statement.

In a move designed to empower common shareholders, the remuneration in excess of individual limits will now be approved by shareholders through a special resolution.

"... the government has notified that remuneration in excess of individual limits laid down for Executive and non-Executive Directors shall henceforth be approved by shareholders through a Special Resolution," the statement said.

The MCA notified commencement of changes to the Companies Act, 2013 along with the rules as part of its policy of 'Minimum Government-Maximum Governance'. The aim is to provide ease of doing business to the law-abiding corporates of the country.

In case a company has defaulted in payment of dues to a bank, financial institution or non-convertible debenture holder, a prior approval would be required from the entity to which the company has defaulted before getting the shareholders' approval.

The MCA said relevant changes have been made to Schedule-V of the Companies Act, 2013 so that companies can follow provisions of Schedule-V and need not take central government's approval when companies are in loss or have inadequate profits.

"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," it added.