Companies (Appointment and Remuneration of Managerial Personnel) Amendment Rules, 2016 notified by MCA.

Companies (Appointment and Remuneration of Managerial Personnel) Amendment Rules, 2016 notified by MCA.

The Ministry of Corporate Affairs vide notification dated 30th of June, 2016 released the Companies (Appointment and Remuneration of Managerial Personnel) Amendment Rules, 2016. (“Managerial Personnel Rules”)
We have presented below summary of the changes made to the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 by the aforesaid Managerial Personnel  Rules.
Companies (Appointment and Remuneration of Managerial Personnel)Rules,2014Companies (Appointment and Remuneration of Managerial Personnel) Amendment Rules, 2016Expected Impact/Comments
RULE 3 :
Omission of terms "Chief Executive Officer (CEO),Company Secretary andChief Financial Officer (CFO)"

. Now there is no need to file return of appointment of a Chief Executive Officer (CEO),Company Secretary and Chief Financial Officer (CFO) within sixty days of the appointment, with the Registrar in
Form  No. MR.1.


RULE 5 :
Sub-Rule (1) –Omission of clauses (v), (vi), (vii) and (ix) to (xi)" in sub-rule (1) relating toDisclosures in Board’s report
In Sub-Rule (2) for the words "the name of every employee of the company, who-"' the words
.. the names of the top ten employees in terms of remuneration drawn and the name of every employee, who-" shall be substituted

In Sub-Rule (2)-

(a) in sub-clause (i) for the words "sixty lakh rupees", the words "one crore and
two lakh rupees" shall be substituted;

(b) in sub-clause (ii) for the words "five lakh rupees per month"' the words " eight lakh and fifty thousand rupees per month" shall be substituted;
. Now there is no requirement to disclose the following in the  Board’s Report:
o   Explanation  of relationship between  average increase in remuneration and company performance
o   Comparison of the remuneration of the Key Managerial Personnel against the performance of the company
o   variations in the market capitalisation of the company
o    Comparison of the each remuneration of the Key Managerial Personnel against the performance of the Company
o   The key parameters for any variable component of remuneration availed by the directors
o   The ratio of 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.
. Now the need to disclose name of top 10 employees in Board Report has been enhanced to monthly salary of Rs 8.5 lakhs as a base case.  However, the amendment fails to clarify if the changed provisions will be applicable to Board Report for financial year 2015-16 ended on March 31, 2016 given that the amendments are notified in the Financial Year 2016-17. 
. The board’s report shall include the names of the top ten employees in terms of remuneration drawn and the name of every employee, who-
o   If employed throughout the financial year, was in receipt of remuneration for any part of that in the aggregate , was not less than 1 crore and 2 lakh rupees (earlier it was Sixty Lakh rupees).
o   If employed for a part of the financial year ,was in receipt of remuneration for any part of that year, at a rate which , in the aggregate was not less than Eight Lakh and Fifty Thousand rupees per month (earlier it was Five Lakh rupees per month).

Rule 3 :
Form MR-1has been substitutedThe following changes has been made in Form MR-1
. 3(a) 'Director identification number (DIN) or Income Tax permanent account number (PAN) or membership number
. 4-Removal of “CEO”, “CFO” and Company Secretary
.8-Insertion of 8(a) and 8(b) if the age of the appointee is more than 70 years than provide the date of passing of special resolution by the shareholders approving the appointment and SRN of related Form No. MGT-14
. 9-Insertion of 9(b) regarding Date of obtaining Central Government approval
. 10-Insertion of 10(b) and 10(c) regarding date of passing the resolution and SRN of Form No. MGT-14 (for filing of Special Resolution)

RULE 3:
Rule 3 now reads as:
“A company shall file a return of appointment of a Managerial Director, Whole time Director or Manager within sixty days of the appointment , with the Registrar in Form.No.MR.1.”
RULE 5:
Rule 5(1) now reads as :
Every listed company shall disclose the Board’s report-
  1. i) the ratio of the remuneration of each director to the median remuneration of the employees of the company for the financial year;
(ii)   the percentage increase in remuneration of each director, Chief Financial Officer, Chief Executive Officer, Company Secretary or Manager, if any, in the financial year;
(iii)  the percentage increase in the median remuneration of employees in the financial year;
(iv)  the number of permanent employees on the rolls of company;
(v)(Omitted)
(vi) (Omitted)
(vii) (Omitted)
(viii) Average percentile increase already made in the salaries of employees other than the managerial personnel in the last financial year and its comparison with the percentile increase in the managerial remuneration and justification thereof and point out if there are any exceptional circumstances for increase in the managerial remuneration;
(ix) (Omitted)
(x) (Omitted)
(xi) (Omitted)
(xii) affirmation that the remuneration is as per the remuneration policy of the company.
5(2) now reads as:
The Board’s report shall include a statement showing the names of the top ten employees in terms of remuneration drawn and the name of every employee, who-
(i) if employed throughout the financial year, was in receipt of remuneration for that year which, in the aggregate, was not less than one crore and 2 lakh rupees;
(ii)    if employed for a part of the financial year, was in receipt of remuneration for any part of that year, at a rate which, in the aggregate, was not less than eight lakhs and fifty thousand rupees;
(iii) if employed throughout the financial year or part thereof, was in receipt of remuneration in that year which, in the aggregate, or as the case may be, at a rate which, in the aggregate, is in excess of that drawn by the managing director or whole-time director or manager and holds by himself or along with his spouse and dependent children, not less than two percent of the equity shares of the company.

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