[aaykarbhavan] Managerial Remuneration Query

Section 198 of Companies Act, 1956 prescribes maximum remuneration for MD at 5% of net profit of financial year. Now, Company prepares its financial results for nine months ended 31.12.13 for limited purpose of submission to stock exchanges. The profit of nine months is say, Rs. 100 and managerial remuneration is say Rs. 8 (i.e.8% of net profit earned for nine months).

 

Query:

The limit of 5% of net profit should be reckoned for the full financial year OR it has mandatorily to be applied to interim period of nine months? The business of the company is such that overall managerial remuneration for the entire financial year would come within 5% of net profit, however there is excess remuneration of 3% paid during interim period.

 

Whether this excess of 3% paid during interim period is violation of section 198 of the companies act, 1956?

 

Regds,

Shripal Shah

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