Clarity on rotation of Auditors
MCA vide Companies (Removal of Difficulties) Third Order 2016 (‘ROD’) dated 30th June 2016 has amended the provisions of section 139(2) by substituting the proviso related to transition period provided for compliance of provisions related to rotation of auditors. Pursuant to ROD, necessary amendment has been made to provide that the provisions of rotation of auditors is required to be complied by the Company existing on or before the commencement of provisions of section 139, shall be done in the first annual general meeting held after three years from the date of commencement of the said section.
The aforesaid ROD will be remove the current contradiction between section 139 and its relevant rules.
Amendment in rules related to Managerial Remuneration
MCA vide notification dated 30th June 2016 has amended the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 by way of Companies(Appointment and Remuneration of Managerial Personnel) Amendment Rules 2016.
Key highlights of the amendments are given below
- Requirement of filing form MR-1 with respect to appointment of CS/CFO & CEO has been omitted
- Following disclosures required to be made by a listed Company with respect to managerial remuneration in the Directors report has been dispensed with
- the explanation on the relationship between average increase in remuneration and company performance;
- comparison of the remuneration of the Key Managerial Personnel against the performance of the company;
- variations in the market capitalisation of the company, price earnings ratio as at the closing date of the current financial year and previous financial year and percentage increase over decrease in the market quotations of the shares of the company in comparison to the rate at which the company came out with the last public offer in case of listed companies, and in case of unlisted companies, the variations in the net worth of the company as at the close of the current financial year and previous financial year;
- comparison of the each remuneration of the Key Managerial Personnel against the performance of the company;
- the key parameters for any variable component of remuneration availed by the directors;
- the ratio of the remuneration of the highest paid director to that of the employees who are not directors but receive remuneration in excess of the highest paid director during the year
- Following changes have been made in disclosures with respect to employee drawing salary of Rs 60 lakhs or more
- The limit of disclosure in respect of remuneration is increased from Rs 60 Lakhs to Rs 1.02 crore per financial year and from Rs 5 Lakhs to Rs 8.5 Lakhs per month
- Name of the top 10 employees in terms of remuneration drawn shall also be disclosed.