⌖ Compliance & Statutory
Effective Capital.
Schedule V cap on managerial remuneration.
⌖ Inputs
⌖ Add
⌖ Less
⌖ Result
Effective Capital
₹60,00,00,000
Band: ₹5 Cr – ₹100 Cr (₹60.00 Cr)
Managerial remuneration cap (per annum)
₹84,00,000
Doubled cap (with special resolution)
§II Part II Schedule V — limits can be doubled by special resolution
₹1,68,00,000
⌖ Schedule V remuneration bands
- Below ₹5 Cr or negative — ₹60 lakh
- ₹5 Cr to ₹100 Cr — ₹84 lakh
- ₹100 Cr to ₹250 Cr — ₹1.2 Cr
- Above ₹250 Cr — ₹1.2 Cr + 0.01% of excess
⌖ §I / Formula
The math,
in the open.
Effective capital is the Companies Act’s yardstick for determining the maximum managerial remuneration that a company with inadequate profits can pay without Central Government approval. The calculation is laid out in Section II, Part II of Schedule V.
EC = Paid-up capital + Securities premium
+ Reserves & Surplus (excl. revaluation)
+ Long-term loans & deposits
− Investments
− Accumulated losses
− Preliminary / pre-operative expenses
− Intangibles (other than software)
The remuneration cap moves up in bands. Most operating businesses sit in the ₹5–100 Cr band with an ₹84 lakh ceiling. The cap can be doubled by a special resolution of shareholders; beyond that, Central Government approval is required.
For companies with adequate profits — those clearing the §198 net-profit threshold — managerial remuneration is computed as a percentage of net profit (typically 11% in total, with sub-caps per director). The Schedule V route only kicks in when profits fall short.