Aim: Attracting better talent at the board level and increased availability of independent directors that should hopefully raise the standards of corporate governance within companies
Result/Impact: MCA notified Section 32 & 40 of the Companies (Amendment) Act, 2020 which says that public companies can now remunerate their non-executive directors, including independent directors, even if they are in red (making losses) or have inadequate profits with the Ministry of Corporate Affairs (MCA) specifying the maximum yearly remuneration that could be paid to them by such companies.
This MCA move will come in handy for many start-ups and unicorns to pay fair compensation to their independent directors.
The limits of remuneration has been defined in Schedule V as per below table:
|S. No.||Where the effective capital (in Rs.) is||Limit of yearly remuneration payable shall not exceed (in Rs.) in case of Managerial Persons||Limit of yearly remuneration payable shall not exceed (in rupees) in case of other director|
|1||Negative or less than 5 crores||60 Lakhs||12 Lakhs|
|2||5 crores and above but less|
than 100 crores.
|84 Lakhs||17 Lakhs|
|3||100 crores and above but less|
than 250 crores.
|120 Lakhs||24 Lakhs|
|4||250 crores and above.||120 lakhs plus 0.01% of the effective capital in excess of Rs.250 crores||24 Lakhs plus 0.01% of the effective capital in excess of Rs. 250 crores|
Source: MCA Notification No. S.O. 1255(E) & No. S.O. 1256(E) dated March 18, 2021