ASSOCHAM urges to Corporate Affairs Ministry to scrap Section 196, 197 and Schedule V

India Infoline News Service | Mumbai |

Section 196, Section 197 and Schedule V of the Companies Act, 2013 that are posing several impractical restrictions and unnecessary approvals for new startup big project

Apex industry body ASSOCHAM has urged the Corporate Affairs Ministry to immediately scrap Section 196, Section 197 and Schedule V of the Companies Act, 2013 that are posing several impractical restrictions and unnecessary approvals for new startup big project companies that are facing extreme difficulty in finding suitable seasoned professionals on board.

Remove the ceiling restrictions of Schedule V on qualified professional and experienced directors for new startup companies and they should be allowed to fix remuneration of these highly qualified and experienced professionals in view of making the projects meet targets and expectations, urged the Associated Chambers of Commerce and Industry of India (ASSOCHAM) in a communication addressed to the Union Minister for Corporate Affairs, Mr Arun Jaitley.

Besides, the new startup companies should also not be compelled to approach for prior approvals from the Centre for managerial remuneration where there are no fixed parameters to assess and judge the competencies of such professionals, further appealed ASSOCHAM.

Considering that domestic industry has to compete globally, ASSOCHAM has suggested the government to consider global standards while fixing the remuneration limits of managerial personnel that are currently very low. Limits are fixed based on effective capital which is usually very low and negligible at startup stage.

Startup companies need to engage highly qualified and experienced professionals and they will not join if they are not paid suitable remuneration by the respective industries thereby resulting in project failure owing to various difficulties and bottlenecks which can only be cracked by experienced professionals, said Mr D.S. Rawat, secretary general of ASSOCHAM.

Moreover, it take years for large projects run by companies to get complete and become profitable, which requires guidance of qualified and experienced directors and with aforementioned ceilings being in place no person shall become the director of that company, said Rawat.

In the Section 196 and Section 197 of the Companies Ac, 2013 it has been mentioned that a company (both public and private) which has no or inadequate profits, it shall not pay to its directors including Managing and Whole Time Directors or manager remuneration exceeding provisions of Schedule V of the Companies Act 2013, noted ASSOCHAM letter to Mr Jaitley who is also looking after the Finance and Defence portfolios.

Besides, in schedule V criterion of effective capital has also been provided and it also mentions that if a company meets out the criterion of Schedule V and pass a special resolution in the general meeting of shareholders it can pay double of limits mentioned in Schedule V without the Centres approval.
 

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