The MCA vide Notification No. F. No. 1/3/2020-CL.I, dated March 18, 2021 has appointed March 18, 2021 as the date on which the amendments issued by the Companies (Amendment) Act, 2020 in Section 149 and Section 197 of the Companies Act, 2013 (“Companies Act”) shall come into force. The amendments issued are in a following manner:
- In Section 149(9) of the Companies Act, the following proviso has been inserted:
“Provided that if a company has no profits or its profits are inadequate, an independent director may receive remuneration, exclusive of any fees payable under sub-section (5) of section 197, in accordance with the provisions of Schedule V.”.
- In Section 197(3) of the Companies Act, after the words “whole-time director or manager,”, the words “or any other non-executive director, including an independent director” has been inserted
The amended provisions now reads as below:
Section 149(9) of the Companies Act:
“149. Company to have Board of Directors-
(9) Notwithstanding anything contained in any other provision of this Act, but subject to the provisions of sections 197 and 198, an independent director shall not be entitled to any stock option and may receive remuneration by way of fee provided under sub-section (5) of section 197, reimbursement of expenses for participation in the Board and other meetings and profit related commission as may be approved by the members.
Provided that if a company has no profits or its profits are inadequate, an independent director may receive remuneration, exclusive of any fees payable under sub-section (5) of section 197, in accordance with the provisions of Schedule V.
Section 197(3) of the Companies Act:
“197. Overall maximum managerial remuneration and managerial remuneration in case of absence or inadequacy of profits-
(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, 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”
The Notification can be accessed at: http://www.mca.gov.in/Ministry/pdf/CommencementNotification_18032021.pdf