Query regarding waiver of excess remuneration

The remuneration payable to the directors of a company, including any managing or whole-time director, shall be determined, in accordance with the provisions of Companies Act 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.tions 309 and 198 deals with remuneration of partners. Section 309 provides that remuneration payable to directors shall be determined either by the articles of the company or by a resolution of the company in general meeting. The resolution may be ordinary or special, as the articles may require.[1] But whatever amount or mode of payment may be so determined, it shall be subject to the provisions of Sections 198 and 309.

Section 198 lays down the overall maximum of managerial remuneration which can be paid by public company or a subsidiary of a public company. The total managerial remuneration payable to directors or manager in respect of a financial year shall not exceed eleven per cent of the net profits of the company. But sometimes a company may make no or inadequate profits in a financial year. This does not mean that its directors shall remain unpaid. In such a case, the company may, with the previous approval of the Central Government, pay by way of minimum remuneration any sum as may be authorised.

A whole-time director or managing director cannot receive remuneration (either on a monthly basis or as a percentage of profits) exceeding 5% of the net profits for one such director and 10% for all of them together. The part-time directors who do not receive any monthly sum as remuneration may be paid 1% of the net profits of the company if the company has a managing agent, 'secretaries and treasurers' or manager. If a company has none of these, such a director or directors can get in all 3% of the net profits of the company. These rats may be exceeded by a resolution of the general meeting of the company with the approval of the Central Government. A recent amendment in the companies Act permits companies to make monthly payment to director with Central Government approval and also to pay remuneration over one percent, or three per cent, as the case may be, with the sanction of the general meeting and the approval of the Government.

If any director has been paid in excess of the above limits, he shall hold the excess amount in trust for the company and shall be bound to refund it. The company shall not waive the recovery of any such sum.