Transition period for Managerial Remuneration

This is very settled law that law applicable at the time of any act or action is law applicable to that action. This is also applicable on Company Law and for that matter also on managerial remuneration also.

The provisions of Schedule XIII (sixth proviso to Para (C) of Section ll of Part ll) of the Companies Act, 1956 (Earlier Act) and as clarified vide Circular number 14/11/2012-CL-VII dated 16th August, 2012, which allowed listed companies and their subsidiaries to pay remuneration, without approval of Central Government, in excess of limits specified in para II Para (C) of such Schedule if the managerial person met the conditions specified therein.

Similar provisions are not available in the Schedule V of the Companies Act, 2013. There is no need to worry because law that time was clear and applicable to the terms and conditions of agreement entered into that time. However, absence of similar provision in present law, may have a question that whether present law discontinue and invalidate act done under earlier law. Many stakeholders asked for a need for a clarification that a managerial person appointed in accordance with such provision of Schedule XIII of Earlier Act may receive relevant remuneration for the period as approved by the company in accordance with such provisions of Earlier Act.

Now, Ministry of Corporate Affairs through its General Circular 07/2015 dated 10^th April 2015 clarified this transitional matter.

A managerial person may continue to receive remuneration for his remaining term in accordance with terms and conditions approved by company as per relevant provisions of Schedule XIII of earlier Act even if the part of his/her tenure falls after 1st April, 2014.

Now the question raised by this circular is very pertinent. The phrase used in the circular “a managerial person referred to in para 1 above may continue to receive” denote all other person receiving remuneration as per provision of earlier Act, may not continue to receive remuneration for remaining term.

Please note, the Companies Act, 2013 does not ask companies and managerial personnel to discontinue agreement in continuation at the time of new Act come into force. All agreements related to Managerial Remuneration under the provision of the Companies Act 1956.