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THE COMPANIES BILL, 1997 PART VI MANAGEMENT AND ADMINISTRATION CHAPTER I : SECTIONS 151-158
Prohibition of simultaneous appointment of different categories of managerial personnel 151 Company not to appoint or employ certain different categories of managerial personnel at the same time- -Notwithstanding anything contained in this Act or any other law or any agreement or instrument, no company shall, appoint or employ at the same time, more than one of the following categories of managerial personnel, namely:- (a) managing director, and (b) manager.
Managerial remuneration, etc. 152 Overall maximum managerial remuneration and managerial remuneration in case of absence or inadequacy of profits— (1) The total managerial remuneration payable by a public company whether listed or unlisted, or a private company which is a subsidiary of a public company, to its directors 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 sections 255. (2) The percentage above shall be exclusive of any fees payable to expenses incurred by, a director for each meeting of the Board, or a committee thereof, attended by him: Provided that such fees shall not exceed five thousand rupees or such higher sum as may be prescribed.. (3) Within the limits of the maximum remuneration specified in sub-section (1), a company may pay a monthly remuneration to its managing or whole-time director in accordance with the provisions of section 245 or to its manager in accordance with the provisions of sub-section (7) of section 260. (4) Notwithstanding anything contained in sub-sections (1) to (3), but subject to the provisions of section 224, read with Schedule II, if, in any financial year, a company has no profits or its profits are inadequate, the company shall not pay to its directors and its managers by way of remuneration any sum, exclusive of any fees payable to directors under sub-section (2) of section 245, except with the previous approval of the Central Government. Explanation.-For the purposes of this section and sections 245, and 260, "remuneration" shall include,- (a) any expenditure incurred by the company in providing any rent free accommodation, or any other benefit or amenity in respect of accommodation free of charge, to any of the persons specified in sub-section (1); (b) any expenditure incurred by the company in providing any other benefit or amenity free of charge or at a concessional rate to any of the persons aforesaid; (c) any expenditure incurred by the company in respect of any obligation or service, which, but for such expenditure by the company, would have been incurred by any of the persons aforesaid; and (d) any expenditure incurred by the company to effect any insurance on the life of, or to provide any pension, annuity or gratuity for, any of the persons aforesaid or his spouse or child.
153 Calculation of commission, etc., in certain cases.3/4 Where any commission or other remuneration payable to any officer or employee of a company (not being a director or a manager) is fixed at a percentage of, or is otherwise based on, the net profits of the company, such profits shall be calculated in the manner laid down in sections 255 and 256.
154 Prohibition of tax-free payments-.3/4 No company shall pay to any officer or employee thereof, whether in his capacity as such or otherwise, remuneration free of any tax, or otherwise calculated by reference to, or varying with, any tax payable by him, or the rate or standard rate of any such tax, or the amount thereof. Explanation.-In this sub-section, the expression "tax" means income-tax , payable under the Income-tax Act, 1961 (43 of 1961).
155 Avoidance of provisions relieving liability of auditors of company.3/4 Save as provided in this section, any provision, whether contained in the articles of a company or in an agreement with a company or in any other instrument, for exempting any person employed by the company as auditor from, or indemnifying him against, any liability which, by virtue of any rule of law, would otherwise attach to him in respect of any negligence, default, misfeasance, breach of duty or breach of trust of which he may be guilty in relation to the company, shall be void: Provided that a company may, in pursuance of any such provision as aforesaid, indemnify any such auditor of any expenses incurred in good faith and in the interest of the company and against any liability incurred by him in defending any proceedings whether civil or criminal, in which judgement is given in his favour or in which he is acquitted or discharged or in connection with any application under section 440 in which relief is granted to him by Court, Regional Director or the Company Law Tribunal.
Prevention of management by undesirable persons 156.Restraint on undischarged insolvent and fraudulent persons to manage companies— (1) If any person, being an undischarged insolvent,- (a) performs any of the functions of a director, or acts as or discharges any of the functions of the manager, of any company; or (b) directly or indirectly takes part or is concerned in the promotion, formation or management of any company; he shall be punishable with imprisonment for a term which may extend to two years, or with fine which may extend to fifty thousand rupees, or with both. (2) Where- (a) a person is convicted of any offence in connection with the promotion, formation or management of a company; or (b) in the course of winding-up of a company it appears that a person- (i) has been guilty of any offence for which he is punishable (whether he has been convicted or not) under section 373; or (ii) has otherwise been guilty, while an officer of the company, of any fraud or misfeasance in relation to the company or of any breach of his duty to the company; the Court may make an order that that person shall not, without the leave of the Court, be a director of, or in any way, whether directly or indirectly, be concerned or take part in the promotion, formation or management of a company, for such period not exceeding five years as may be specified in the order. (3) In sub-section (2), the expression "the Court",- (a) in relation to the making of an order against any person by virtue of clause (a) thereof, includes the Court by which he is convicted, as well as any Court having jurisdiction to wind up the company as respects which the offence was committed; and (b) in relation to the granting of leave, means any Court having jurisdiction to wind up the company as respects which leave is granted. (4) A person intending to apply for the making of an order under this section by the Court having jurisdiction to wind up a company shall give not less than ten days' notice of his intention to the person against whom the order is sought, and at the hearing of the application, the last-mentioned person may appear and himself give evidence or call witnesses. (5) An application for the making of an order under this section by the Court having jurisdiction to wind up a company may be made by the Company Liquidator, or by the liquidator of the company, or by any person who is or has been a member or creditor of the company. (6) On the hearing of any application for an order under this section by the Company Liquidator or the liquidator, or of any application for leave under this section by a person against whom an order has been made on the application of the Company Liquidator or liquidator, the Company Liquidator or liquidator shall appear and call the attention of the Court to any matters which seem to him to be relevant, and may himself give evidence or call witnesses. (7) An order may be made by virtue of sub-clause (ii) of clause (b) of sub-section (2), notwithstanding that the person concerned may be criminally liable in respect of the matters on the ground of which the order is to be made. (8) If any person acts in contravention of an order made under this section, he shall, in respect of each offence, be punishable with imprisonment for a term, which may extend to two years, or with fine which may extend to fifty thousand rupees, or with both. (9) The provisions of this section shall apply to every company and shall be in addition to, and without prejudice to the operation of, any other provision contained in this Act.
Restriction on appointment of firms and bodies corporate to offices 157 Restriction on appointment of firm or body corporate to office or place of profit under a company.- (1) No company shall appoint or employ any firm or body corporate to or in any office or place of profit under the company, other than the office of trustee for the holders of debentures of the company, for a term exceeding five years at a time: (2) Any office or place in a company shall be deemed to be an office or place of profit under the company, within the meaning of this section, if the person holding it obtains from the company anything by way of remuneration, whether as salary, fees, commission, perquisites, the right to occupy free of rent any premises as a place of residence, or otherwise. (3) This section shall not apply to a private company, unless it is a subsidiary of a public company.
158 Formation and registration of Group Resource Company under the Act – (1) Where two or more companies, which are constituents of a group, agree in writing to form a company under this Act, for the purpose of advising them on matters, such as, project implementation, cost minimisation, reverse engineering, global marketing, financial operations, efficient management, secretarial, legal or any other matter, a company with the sole object of providing professional expertise or any of the services referred to above and satisfying the conditions mentioned in this section may be formed and registered under this Act. (2) A company which is formed and registered under sub-section(1), shall indicate in its Memorandum that it shall operate and function on a cost sharing principle and on no profit or no loss basis in respect of services provided by it under this section. (3) The costs incurred by the companies constituting the group or in obtaining the services of the company formed and registered under sub-section (1).or otherwise shall be clearly disclosed in the financial statements of such companies. (4) A certificate by a Cost Accountant within the meaning of the Costs and Works Accountants Act, 1959 shall be attached along with its annual accounts and profit and loss account indicating that the company has operated strictly on a cost sharing basis. Explanation: In this section "group" has the same meaning as in the Monopolies and Restrictive Trade Practices Act, 1969 (54 of 1969).
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