(1) Every listed company and a company belonging to other class of companies as may be prescribed shall annex with its Board's report made in terms of sub-section (3) of section 134, a secretarial audit report, given by a company secretary in practice, in such form as may be prescribed.

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(2) It shall be the duty of the company to give all assistance and facilities to the company secretary in practice, for auditing the secretarial and related records of the company.

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(3) The Board of Directors, in their report made in terms of sub-section (3) of section 134, shall explain in full any qualification or observation or other remarks made by the company secretary in practice in his report under sub-section (1).

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(4) If a company or any officer of the company or the company secretary in practice, contravenes the provisions of this section, the company, every officer of the company or the company secretary in practice, who is in default, shall be ¹[liable to a penalty of two lakh rupees].

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(1) The total managerial remuneration payable by a public company, to its directors, including managing director and whole-time director, and its manager in respect of any financial year shall not exceed eleven per cent. of the net profits of that company for that financial year computed in the manner laid down in section 198 except that the remuneration of the directors shall not be deducted from the gross profits:

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Provided that the company in general meeting may, ¹*** authorise the payment of remuneration exceeding eleven per cent. of the net profits of the company, subject to the provisions of Schedule V:

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Provided further that, except with the approval of the company in general meeting, ²[by a special resolution,]--

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(i) the remuneration payable to any one managing director; or whole-time director or manager shall not exceed five per cent. of the net profits of the company and if there is more than one such director remuneration shall not exceed ten per cent. of the net profits to all such directors and manager taken together;

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(ii) the remuneration payable to directors who are neither managing directors nor whole-time directors shall not exceed,--

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(A) one per cent. of the net profits of the company, if there is a managing or whole-time director or manager;

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(B) three per cent. of the net profits in any other case.

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³[Provided also that, 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 creditor, as the case may be, shall be obtained by the company before obtaining the approval in the general meeting.]

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(2) The percentages aforesaid shall be exclusive of any fees payable to directors under sub-section (5).

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(3) Notwithstanding anything contained in sub-sections (1) and (2), but subject to the provisions of Schedule V, if, in any financial year, a company has no profits or its profits are inadequate, the company shall not pay to its directors, including any managing or whole-time director or manager, ⁴[or any other non-executive director, including an independent director] by way of remuneration any sum exclusive of any fees payable to directors under sub-section (5) hereunder except in accordance with the provisions of Schedule V ⁵***.

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(4) The remuneration payable to the directors of a company, including any managing or whole-time director or manager, shall be determined, in accordance with and subject to the provisions of this section, either by the articles of the company, or by a resolution or, if the articles so require, by a special resolution, passed by the company in general meeting and the remuneration payable to a director determined aforesaid shall be inclusive of the remuneration payable to him for the services rendered by him in any other capacity:

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Provided that any remuneration for services rendered by any such director in other capacity shall not be so included if--

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(a) the services rendered are of a professional nature; and

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(b) in the opinion of the Nomination and Remuneration Committee, if the company is covered under sub-section (1) of section 178, or the Board of Directors in other cases, the director possesses the requisite qualification for the practice of the profession.

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(5) A director may receive remuneration by way of fee for attending meetings of the Board or Committee thereof or for any other purpose whatsoever as may be decided by the Board:

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Provided that the amount of such fees shall not exceed the amount as may be prescribed:

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Provided further that different fees for different classes of companies and fees in respect of independent director may be such as may be prescribed.

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(6) A director or manager may be paid remuneration either by way of a monthly payment or at a specified percentage of the net profits of the company or partly by one way and partly by the other.

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⁶* * * * * *

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(8) The net profits for the purposes of this section shall be computed in the manner referred to in section 198.

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⁷[(9) If any director draws or receives, directly or indirectly, by way of remuneration any such sums in excess of the limit prescribed by this section or without approval required under this section, he shall refund such sums to the company, within two years or such lesser period as may be allowed by the company, and until such sum is refunded, hold it in trust for the company.]

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(10) The company shall not waive the recovery of any sum refundable to it under sub-section (9) unless ⁸[approved by the company by special resolution within two years from the date the sum becomes refundable.]

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⁹[Provided that 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 creditor, as the case may be, shall be obtained by the company before obtaining approval of such waiver.]

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(11) In cases where Schedule V is applicable on grounds of no profits or inadequate profits, any provision relating to the remuneration of any director which purports to increase or has the effect of increasing the amount thereof, whether the provision be contained in the companys memorandum or articles, or in an agreement entered into by it, or in any resolution passed by the company in general meeting or its Board, shall not have any effect unless such increase is in accordance with the conditions specified in that Schedule ¹⁰***.

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(12) Every listed company shall disclose in the Boards report, the ratio of the remuneration of each director to the median employees remuneration and such other details as may be prescribed.

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(13) Where any insurance is taken by a company on behalf of its managing director, whole-time director, manager, Chief Executive Officer, Chief Financial Officer or Company Secretary for indemnifying any of them against any liability in respect of any negligence, default, misfeasance, breach of duty or breach of trust for which they may be guilty in relation to the company, the premium paid on such insurance shall not be treated as part of the remuneration payable to any such personnel:

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Provided that if such person is proved to be guilty, the premium paid on such insurance shall be treated as part of the remuneration.

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(14) Subject to the provisions of this section, any director who is in receipt of any commission from the company and who is a managing or whole-time director of the company shall not be disqualified from receiving any remuneration or commission from any holding company or subsidiary company of such company subject to its disclosure by the company in the Board's report.

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¹¹[(15) If any person makes any default in complying with the provisions of this section, he shall be liable to a penalty of one lakh rupees and where any default has been made by a company, the company shall be liable to a penalty of five lakh rupees.]

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¹²[(16) The auditor of the company shall, in his report under section 143, make a statement as to whether the remuneration paid by the company to its directors is in accordance with the provisions of this section, whether remuneration paid to any director is in excess of the limit laid down under this section and give such other details as may be prescribed..

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(17) On and from the commencement of the Companies (Amendment) Act, 2017, any application made to the Central Government under the provisions of this section [as it stood before such commencement], which is pending with that Government shall abate, and the company shall, within one year of such commencement, obtain the approval in accordance with the provisions of this section, as so amended.]

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(1) Every company belonging to such class or classes of companies as may be prescribed shall have the following whole-time key managerial personnel,--

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(i) managing director, or Chief Executive Officer or manager and in their absence, a whole-time director;

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(ii) company secretary; and

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(iii) Chief Financial Officer :

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Provided that an individual shall not be appointed or reappointed as the chairperson of the company, in pursuance of the articles of the company, as well as the managing director or Chief Executive Officer of the company at the same time after the date of commencement of this Act unless,--

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(a) the articles of such a company provide otherwise; or

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(b) the company does not carry multiple businesses:

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Provided further that nothing contained in the first proviso shall apply to such class of companies engaged in multiple businesses and which has appointed one or more Chief Executive Officers for each such business as may be notified by the Central Government.

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(2) Every whole-time key managerial personnel of a company shall be appointed by means of a resolution of the Board containing the terms and conditions of the appointment including the remuneration.

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(3) A whole-time key managerial personnel shall not hold office in more than one company except in its subsidiary company at the same time:

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Provided that nothing contained in this sub-section shall disentitle a key managerial personnel from being a director of any company with the permission of the Board:

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Provided further that whole-time key managerial personnel holding office in more than one company at the same time on the date of commencement of this Act, shall, within a period of six months from such commencement, choose one company, in which he wishes to continue to hold the office of key managerial personnel:

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Provided also that a company may appoint or employ a person as its managing director, if he is the managing director or manager of one, and of not more than one, other company and such appointment or employment is made or approved by a resolution passed at a meeting of the Board with the consent of all the directors present at the meeting and of which meeting, and of the resolution to be moved thereat, specific notice has been given to all the directors then in India.

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(4) If the office of any whole-time key managerial personnel is vacated, the resulting vacancy shall be filled-up by the Board at a meeting of the Board within a period of six months from the date of such vacancy.

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¹[(5) If any company makes any default in complying with the provisions of this section, such company shall be liable to a penalty of five lakh rupees and every director and key managerial personnel of the company who is in default shall be liable to a penalty of fifty thousand rupees and where the default is a continuing one, with a further penalty of one thousand rupees for each day after the first during which such default continues but not exceeding five lakh rupees.]

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(1) In computing the net profits of a company in any financial year for the purpose of section 197,--

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(a) credit shall be given for the sums specified in sub-section (2), and credit shall not be given for those specified in sub-section (3); and

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(b) the sums specified in sub-section (4) shall be deducted, and those specified in sub-section (5) shall not be deducted.

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(2) In making the computation aforesaid, credit shall be given for the bounties and subsidies received from any Government, or any public authority constituted or authorised in this behalf, by any Government, unless and except in so far as the Central Government otherwise directs.

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(3) In making the computation aforesaid, credit shall not be given for the following sums, namely:--

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(a) profits, by way of premium on shares or debentures of the company, which are issued or sold by the company ¹[unless the company is an investment company as referred to in clause (a) of the Explanation to section 186];

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(b) profits on sales by the company of forfeited shares;

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(c) profits of a capital nature including profits from the sale of the undertaking or any of the undertakings of the company or of any part thereof;

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(d) profits from the sale of any immovable property or fixed assets of a capital nature comprised in the undertaking or any of the undertakings of the company, unless the business of the company consists, whether wholly or partly, of buying and selling any such property or assets:

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Provided that where the amount for which any fixed asset is sold exceeds the written-down value thereof, credit shall be given for so much of the excess as is not higher than the difference between the original cost of that fixed asset and its written-down value;

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(e) any change in carrying amount of an asset or of a liability recognised in equity reserves including surplus in profit and loss account on measurement of the asset or the liability at fair value.

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²[(f) any amount representing unrealised gains, notional gains or revaluation of assets.]

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(4) In making the computation aforesaid, the following sums shall be deducted, namely:--

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(a) all the usual working charges;

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(b) directors remuneration;

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(c) bonus or commission paid or payable to any member of the company's staff, or to any engineer, technician or person employed or engaged by the company, whether on a whole-time or on a part-time basis;

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(d) any tax notified by the Central Government as being in the nature of a tax on excess or abnormal profits;

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(e) any tax on business profits imposed for special reasons or in special circumstances and notified by the Central Government in this behalf;

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(f) interest on debentures issued by the company;

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(g) interest on mortgages executed by the company and on loans and advances secured by a charge on its fixed or floating assets;

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(h) interest on unsecured loans and advances;

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(i) expenses on repairs, whether to immovable or to movable property, provided the repairs are not of a capital nature;

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(j) outgoings inclusive of contributions made under section 181;

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(k) depreciation to the extent specified in section 123;

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(l) the excess of expenditure over income, which had arisen in computing the net profits in accordance with this section in any year ¹***, in so far as such excess has not been deducted in any subsequent year preceding the year in respect of which the net profits have to be ascertained;

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(m) any compensation or damages to be paid in virtue of any legal liability including a liability arising from a breach of contract;

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(n) any sum paid by way of insurance against the risk of meeting any liability such as is referred to in clause (m);

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(o) debts considered bad and written off or adjusted during the year of account.

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(5) In making the computation aforesaid, the following sums shall not be deducted, namely:--

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(a) income-tax and super-tax payable by the company under the Income-tax Act, 1961 (43 of 1961), or any other tax on the income of the company not falling under clauses (d) and (e) of subsection (4);

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(b) any compensation, damages or payments made voluntarily, that is to say, otherwise than in virtue of a liability such as is referred to in clause (m) of sub-section (4);

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(c) loss of a capital nature including loss on sale of the undertaking or any of the undertakings of the company or of any part thereof not including any excess of the written-down value of any asset which is sold, discarded, demolished or destroyed over its sale proceeds or its scrap value;

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(d) any change in carrying amount of an asset or of a liability recognised in equity reserves including surplus in profit and loss account on measurement of the asset or the liability at fair value.

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(1) No company shall appoint or employ at the same time a managing director and a manager.

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(2) No company shall appoint or re-appoint any person as its managing director, whole-time director or manager for a term exceeding five years at a time:

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Provided that no re-appointment shall be made earlier than one year before the expiry of his term.

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(3) No company shall appoint or continue the employment of any person as managing director, whole-time director or manager who --

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(a) is below the age of twenty-one years or has attained the age of seventy years:

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Provided that appointment of a person who has attained the age of seventy years may be made by passing a special resolution in which case the explanatory statement annexed to the notice for such motion shall indicate the justification for appointing such person;

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¹Provided further that where no such special resolution is passed but votes cast in favour of the motion exceed the votes, if any, cast against the motion and the Central Government is satisfied, on an application made by the Board, that such appointment is most beneficial to the company, the appointment of the person who has attained the age of seventy years may be made.]";

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(b) is an undischarged insolvent or has at any time been adjudged as an insolvent;

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(c) has at any time suspended payment to his creditors or makes, or has at any time made, a composition with them; or

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(d) has at any time been convicted by a court of an offence and sentenced for a period of more than six months.

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(4) Subject to the provisions of section 197 and Schedule V, a managing director, whole-time director or manager shall be appointed and the terms and conditions of such appointment and remuneration payable be approved by the Board of Directors at a meeting which shall be subject to approval by a resolution at the next general meeting of the company and by the Central Government in case such appointment is at variance to the conditions ²[specified in Part I of that Schedule]:

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Provided that a notice convening Board or general meeting for considering such appointment shall include the terms and conditions of such appointment, remuneration payable and such other matters including interest, of a director or directors in such appointments, if any:

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Provided further that a return in the prescribed form shall be filed within sixty days of such appointment with the Registrar.

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(5) Subject to the provisions of this Act, where an appointment of a managing director, whole-time director or manager is not approved by the company at a general meeting, any act done by him before such approval shall not be deemed to be invalid.

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Notwithstanding anything contained in this Chapter, ²*** a company may, while according its approval under section 196, to any appointment or to any remuneration under section 197 in respect of cases where the company has inadequate or no profits, fix the remuneration within the limits specified in this Act, at such amount or percentage of profits of the company, as it may deem fit and while fixing the remuneration, ¹*** the company shall have regard to--

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(a) the financial position of the company;

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(b) the remuneration or commission drawn by the individual concerned in any other capacity;

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(c) the remuneration or commission drawn by him from any other company;

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(d) professional qualifications and experience of the individual concerned;

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(e) such other matters as may be prescribed.

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(1) The functions of the company secretary shall include,--

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(a) to report to the Board about compliance with the provisions of this Act, the rules made thereunder and other laws applicable to the company;

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(b) to ensure that the company complies with the applicable secretarial standards;

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(c) to discharge such other duties as may be prescribed.

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Explanation.--For the purpose of this section, the expression secretarial standards means secretarial standards issued by the Institute of Company Secretaries of India constituted under section 3 of the Company Secretaries Act, 1980 (56 of 1980) and approved by the Central Government.

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(2) The provisions contained in section 204 and section 205 shall not affect the duties and functions of the Board of Directors, chairperson of the company, managing director or whole-time director under this Act, or any other law for the time being in force.

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(1) The Central Government may, by notification, make rules for carrying out the provisions of this Act.

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(2) Without prejudice to the generality of the provisions of sub-section (1), the Central Government may make rules for all or any of the matters which by this Act are required to be, or may be, prescribed or in respect of which provision is to be or may be made by rules.

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(3) Any rule made under sub-section (1) may provide that a contravention thereof shall be punishable with fine which may extend to five thousand rupees and where the contravention is a continuing one, with a further fine which may extend to five hundred rupees for every day after the first during which such contravention continues.

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(4) Every rule made under this section and every regulation made by Securities and Exchange Board under this Act, shall be laid, as soon as may be after it is made, before each House of Parliament, while it is in session, for a total period of thirty days which may be comprised in one session or in two or more successive sessions, and if, before the expiry of the session immediately following the session or the successive sessions aforesaid, both Houses agree in making any modification in the rule or regulation or both Houses agree that the rule or regulation should not be made, the rule or regulation shall thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that rule or regulation.

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