Chapter 3 Directors: Appointment & Remuneration of Managerial Person

Chapter 3: Appointment & 3.1

Remuneration of Managerial Personnel

1. PQR Ltd. appointed Mr. Sachin as their Managing Director. They now seek to appoint Mr. Karthik as their
Manager. Can they do so?
A. Yes, Sec 196 provides B. No, as Sec 196 provides C. Appointment of MD, Manager D. None of
about appointment of that Company shall not and Whole Time Director will the
MD, Manager and appoint MD and Manager depend on the Articles of the above.
Whole Time Director. at the same time. Company.

2. PQR Ltd. appointed Mr. Sachin as their Managing Director. They now seek to appoint Mr. Karthik as their
Whole Time Director. Can they do so?
A. Yes, Sec 196 B. No, as Sec 196 C. Appointment of MD, D. Yes, under Sec 196 there is
provides about provides that Manager and Whole no restriction on
appointment of Company shall not Time Director will appointment of Whole Time
MD, Manager appoint MD and depend on the Director along with
and Whole Time Whole Time Director Articles of the Managing Director or
Director. at the same time. Company. Manager.

3. PQR Ltd. appointed Mr. Sachin as their Managing Director. They now seek to appoint Mr. Karthik as their
Managing Director. Can they do so?
A. Yes, Sec 196 B. No, as Sec 196 C. Yes, under Sec D. Appointment of MD, Manager
provides about provides that 196 there is no and Whole Time Director will
appointment of Company shall restriction on depend on the Articles of the
MD, Manager and not appoint MD appointment of Company.
Whole Time and Manager at Managing
Director. the same time. Director along
with Managing
Director.

4. PQR Ltd. appointed Mr. Sachin as their Manager. They now seek to appoint Mr. Karthik as their Whole
Time Director. Can they do so?
A. Yes, Sec 196 B. No, as Sec 196 provides C. Appointment of D. Yes, under Sec 196 there is
provides about that Company shall not MD, Manager and no restriction on
appointment of appoint Manager and Whole Time appointment of Whole Time
MD, Manager Whole Time Director at Director will Director along with
and Whole Time the same time. depend on the Managing Director or
Director. Articles of the Manager.
Company.

5. PQR Ltd. appointed Mr. Sachin as their Manager. They now seek to appoint Mr. Karthik as their Manager.
Can they do so?
A. Yes, Sec 196 B. No, as Sec 196 C. Appointment of D. Yes, under Sec 196 there is
provides about provides that MD, Manager and no restriction on
appointment of Company shall not Whole Time appointment of Manager
MD, Manager and appoint Manager Director will along with Manager
Whole Time and Whole Time depend on the
Director. Director at the Articles of the
same time. Company.

© CA Darshan D. Khare
 Chapter 3 Directors: Appointment & Remuneration of managerial Person

6. XYZ Ltd. wants to appoint Mr. Mickey aged 62 years as their Managing Director. What resolution is
3.2
required to appoint Mr. Mickey?
A. GM-SR, as Mr. Mickey is B. GM-OR, as Mr. C. GM-SR and Approval of the CG. D. None of
above 60 years of age. Mickey is less the
than 70 years above
of age.

7. XYZ Ltd. wants to appoint Mr. Mickey aged 72 years as their Managing Director. What resolution is
required to appoint Mr. Mickey?
A. GM-OR B. GM-SR, as Mr. Mickey is more C. Prior approval of CG D. (b) or (a) & (c)
than 70 years of age.

8. Sec 196(2)(4)(5) shall not apply to

A. Small Companies B. Private Companies C. Dormant Companies D. Government
Companies

9. In JBL ltd, Mr. X is the only Executive Director wants to draw Rs 500,000 as remuneration from profit of Rs
50 lacs. How much maximum remuneration is allowed?
a. 5,00,000 b. 5,50,000 c. 6,00,000 d. 6,60,000

10.. In JBL Ltd, Mr. X & Y are Executive Directors wants to draw Rs 500,000 as remuneration from profit of Rs
50lacs. How much maximum remuneration is allowed together?
A. 5,00,000 B. 5,50,000 C. 6,00,000 D. 6,60,000

11.. In JBL Ltd, Mr. X is Non-Executive Director wants to draw Rs 500,000 as a remuneration from profit of Rs
50lacs in the absence of executive director. How much maximum remuneration is allowed to Mr. X?
a. 5,000 b. 50,000 c. 500,000 d. 1,50,000

12 In JBL Ltd, Mr. X is the only Non-Executive Director wants to draw Rs 200,000 as a remuneration from profit
of Rs 50lacs where Mr. Y who is executive director. How much maximum remuneration is allowed to Mr. X?
A. 150000 B. 50,000 C. 350000 D. None of the above

13.. In JBL Ltd, Mr. X is the only Non Executive Director wants to draw Rs 200,000 as a remuneration from loss
of Rs 50lacs where Mr. Y who is executive director. How much maximum remuneration is allowed to Mr. X
without obtaining shareholders approval?
a. 5000 b. 150000 c. 200000 d. No
remuneratio
n

14. PRV Ltd wants to pay remuneration more than above mentioned limits of Part B of Schedule II, it can do so
after___
A. BM- OR B. GM- OR C. GM-SR D. GM-SR and
CG approval

15. As per Section 196(4) approval of shareholder is mandatory for appointment of MD/WTD in Public Limited
Company? If Company fail to get approval of shareholders then whether work/act done by MD/WTD
during Board Meeting to general Meeting shall be valid or invalid?
A. Valid B. Invalid C. Void D. As per Section 196(5) where an appointment of a managing
director, whole-time director or manager is not approved by
the company at a general meeting, any act done by him
before such approval shall not be deemed to be invalid.

© CA Darshan D. Khare
 Chapter 3 Directors: Appointment & Remuneration of Managerial Person

16. As per Section 197, which persons shall be include in limit of 11% Remuneration?
3.3
A. Directors and B. Whole-Time Director C. Manager D. All of the
Managing Director above

17. Whether Section 197 & Schedule V applicable to Private Limited Company?
a. Yes b. No

18. Key managerial personnel in relation to a company means

A. The Chief Executive B. The company C. The whole time D. All of

Officer or the secretary director the
managing director or above
the manager

19 Managing Director as a director is entrusted with---- of the affairs of the company

A. Substantial powers of B. very less powers of C. 50 % powers of D. 75% powers of
the management the management management management

20 Whole time director includes a director in the whole time employment of the company
A. TRUE B. FALSE

21 ABC Ltd. wants to appoint Mr. MD as managing director of the company for life. Is the action of company is
in lines with the provisions of the companies act, 2013?

A. YES B. No

22 Mr. Young will be completing 21 years of his age on 1 June 2018. DEF Ltd. wants to appoint him as
managing director of the company on 30 May 2018. Is the action of company is in lines with the provisions
of the companies act, 2013
A. Yes B. No

23 Where an appointment of the Managing Director is not approved by the company at a general meeting,
any act done by him before such approval shall be deemed to be valid
A. TRUE B. FALSE

24 Can a company appoint or employ at the same time a managing director and a manager
A. YES B. NO

25 Crore Ltd is a public company having paid up share capital of Rs 12 crore. According to Rule 8 of the
Companies Rules 2014 , what compliance is to be done?

A. Authorized B. Share holder C. Underwriter D. Whole time key managerial

Authority personnel

26 If the office of any KMP is vacated, the resulting vacancy shall be filled by the Board at a meeting of the
Board within a period of --------- from the date of such vacancy
A. 6 MTHS B. 3 MTHS C. 1 MONTHS

© CA Darshan D. Khare
 Chapter 3 Directors: Appointment & Remuneration of managerial Person

27 Red Ltd. contravenes the provisions of section 203. What is the penalty for the company contravening the
provisions of this section
3.4
A. Fine shall not be B. Fine shall not be less C. Fine shall not be D. Fine shall not be less than
less than Rs 1 lakh than Rs 1 lakh but less than Rs 1 Rs 50000 but which mat
but which mat which mat extend to lakh but which extend to Rs. 5 lakhs
extend to Rs. 3 Rs. 2 lakhs mat extend to
lakhs Rs. 5 lakhs

28 Red Ltd. contravenes the provisions of section 203. What is the penalty for the director and KMP
contravening the provisions of this section?

A. Fine extending Rs B. Fine extending Rs C. Fine extending Rs 5000 D. Fine extending Rs

5000 and Rs 1000 50000 and Rs 100 for and Rs 100 for every day 50000 and Rs
for every day during every day during during which 1000 for every day
which which contravention contravention continues during which
contravention continues contravention
continues continues

29 What are the functions of the Company Secretary

A. To ensure that company complies B. To assist the Board in the C. A or B D. A and
with the applicable secretarial conduct of the affairs of B
standards the company

30 If in any financial year, a company has no profits or its profits are inadequate , the company shall not pay
by way of remuneration any sum exclusive of sitting fees to its directors, including any managing or whole
time director or manager except in accordance with the provisions of Schedule V

A. TRUE B. FALSE

31 The Remuneration payable to the directors of a company shall be determined in accordance with and
subject to the provisions of this section , either

A. Memorandum of B. Income Tax C. Articles of Association D. Any of

Association Gazette the
Above

32 The company shall waive the recovery of any sum refundable to it under sub section 9unless permitted by
the CG
A. TRUE B. FALSE

33 It shall disclose in the Board’s Report the ------------------- and such other details as may be prescribed
A. Educational B. Income tax paid C. ratio of the remuneration D. GST Payable by the Key
qualification of the by the Directors of each director to the managerial Personnel
Director’s Children median employee’s
remuneration

34 Where any insurance is taken by a company on behalf of its Managing Director for indemnifying any
liability in respect of any negligence for which they may be guilty in relation to the company , the premium
paid on such insurance --------as part of the remuneration payable to any such personnel
A. shall Be treated B. shall not be treated

© CA Darshan D. Khare
 Chapter 3 Directors: Appointment & Remuneration of Managerial Person

3.5
35 Following companies are required to conduct secretarial audit
A. Every public company having paid up B. Every public company C. A and B D. A or B
share capital of Rs 50 crore or more having turnover of Rs
250 crore or more

36 An expatriate managerial person shall be eligible to the following perquisites which shall not be included in
the computation of the ceiling on remuneration specified in section II or section III

A. Children’s B. Leave travel C. Holiday passage for children staying D. All of the
education concession outside India or family staying abroad above
allowance

37 The total managerial remuneration payable to the directors and manager in respect of any financial year
shall not exceed ------- of the company for that financial year
A. 6 % of net profits of B. 11% of net profits of C. 6% of paid up D. 11% of paid up share
the company for the company for that share capital of capital of the company
that financial year financial year the company for for that financial year
that financial
year

38 In continuation of the above question, what conditions are to be complied to exceed the remuneration as
above?

A. Company in Board B. Company in Extra C. Company in D. Company in general

meeting with approval ordinary general general meeting meeting with approval of
of CG subject to meeting with approval with approval of CG subject to provisions of
provisions of Schedule of CG subject to Court subject to Schedule V
V provisions of Schedule provisions of
V Schedule IV

39 If there is one MD/WTD/Manager what is the remuneration payable to them

A)Shall not exceed 11% of net B)Shall not exceed 5% of C)Shall not exceed 10% D)Shall not exceed 8%
profits of the company for net profits of the of net profits of the of net profits of the
that financial year company for that company for that company for that
financial year financial year financial year

40 If there is more than one MD/WTD/Manager taken together what is the remuneration payable to them?

A)Shall not exceed 5% of net B)Shall not exceed 11% C)Shall not exceed 17% D)Shall not exceed 10%
profits of the company for of net profits of the of net profits of the of net profits of the
that financial year company for that company for that company for that
financial year financial year financial year

41 The total managerial remuneration payable to the director whois neither a managing director nor a whole
time director in respect of any financial year shall not exceed ------- of the company for that financial year

© CA Darshan D. Khare
 Chapter 3 Directors: Appointment & Remuneration of managerial Person

A. 1 % of the net B. 10 % of the net profits if C. 11 % of the net D. 7 % of the net

profits if the the company has profits if the profits if the
3.6
company has employed a MD or WTD company has company has
employed a MD or or manager employed a MD or employed a MD or
WTD or manager WTD or manager WTD or manager

42 The total remuneration payable to the directors who are neither managing director nor whole time
director in respect of any financial year shall not exceed ------- of the company for that financial year if
there is no MD /WTD

A. 10 % of the net profits B. 5 % of the net C. 3 % of the net D. 11 % of the net

profits profits profits

43 Body Builders ltd wants to appoint Mr. S aged 71 years as a managing director of the company because of
his proven ability to convert sick companies into profitable ones . Can he be appointed as per the
provisions of the Companies Act, 2013
A. Yes, by the passing of B. Yes, by C. Yes, by the passing of D. Yes, by the passing of
ordinary resolution and the special resolution special resolution and the
the explanatory passing and the explanatory explanatory statement
statement annexed to the of statement annexed annexed to the notice
notice shall indicate the special to the notice shall shall indicate the
justification for resoluti not require to justification for appointing
appointing such person
on indicate the such person.
justification for
appointing such
person.

44 Sick Ltd. is not doing well and also incurring losses. The effective capital of the company is Rs 20 crores. Mr.
D is the managing director of the company. Advise the company about the quantum of remuneration
payable to him.

A)Maximum managerial B)Maximum managerial C)Maximum managerial D)Maximum managerial

remuneration Rs. 168 Lakh remuneration Rs. 60 lakh remuneration Rs. 50 lakh remuneration Rs. 94
lakh

45 In addition to the above question, can the managerial remuneration be paid above the maximum limit
specified above
A. No B. Yes, if a special Yes, if an ordinary resolution is passed in this
resolution is passed regard
in this regard

46 Fever Ltd. is not doing well and also incurring losses. The effective capital of the company is Rs 260 crores.
Mr. D is the managing director of the company. Advise the company about the quantum of maximum
remuneration payable to him
A. Rs 2408000 B. Rs 26010000 C. Rs 24050000 D. Rs 24010000

47 Remuneration to a non executive director may be paid only if the company has made profits

© CA Darshan D. Khare
 Chapter 3 Directors: Appointment & Remuneration of Managerial Person

A. True B. False
3.7
48 Healthy Ltd. is not doing well and also incurring losses. The effective capital of the company is Rs 200
crores. The company wants to make payment of commission of 6% of the net profits per annum to the
ordinary directors of the company.

Advise whether the company can do so

A. Yes , only with the B. No C. Yes , only with the
approval of the approval Board meeting
members in general
meeting

49 Is the “ Security premium account” added in the computation of effective capital of the company?

A. no B. yes

50 The effective capital shall be calculated as on the last day of the financial year preceding the financial year
in which the appointment of the managerial person is made.

A. True B. False

51 As per Rule 4 of the Companies Rules, 2014 maximum sitting fees payable to a director is Rs. 100000 for
every meeting of the board or any committee of the Board.

A. False B. True

52 Sitting fees payable to non executive directors is increased from Rs 40000 to Rs 60000 per meeting.
Examine whether the increase is in accordance with the Companies Act, 2018
A. Yes B. No

53 Mr. T is a soft skills trainer, appointed by P ltd. as its non executive ordinary director and it wants to pay
him fee, on case to case basis, for training done with trainees at the training center. Whether payment of
such fee to him would amount to payment of managerial remuneration to a director subject to any
restriction under the Companies Act, 2013
A.Yes B. No

54 Mr. H was appointed as Managing Director of Good Luck ltd. for a period of 5 years with effect from 1 April
2013 on a salary of Rs. 12 lakhs per annum with other perquisites. BOD terminated his services from 1
March 2016. State how much compensation is to be paid to Mr. H.
A. Rs 12 lakhs B. Rs. 18 Lakhs C. Rs 24 D. Rs 25 Lakhs
Lakhs

55 Rich Ltd. wants to pay Rs. 150000 as sitting fees to the directors of the company. The company wants to
include the above clause in its articles of association . You are required to advise the company about the
validity of such clause
A. Valid B. Not valid

56 The amount of sitting fees received by Mr X , a director exceeds Rs 100,000 . What is to be done now
A. Mr. X shall refund to the B. The company shall waive
company such excess recovery of such excess
amount amount

© CA Darshan D. Khare
 Chapter 3 Directors: Appointment & Remuneration of managerial Person

3.8
57 The payment of remuneration as per Schedule V is possible only if the company has not made any default
in repayment of any of its debts or debentures or interest payable thereon for a continuous period of -----in
the preceding financial year before the date of appointment of such managerial person
A. 12 months B. 6 months C. 3 months D. 30 days

58 If the office of any whole time KMP is vacated , the resulting vacancy shall be filled up by the Board at a
meeting of the Board within a period of 9 months from the date of such vacancy
A. true B. false

59 List Ltd is a listed company. As per the Rule 8 of the Companies Rules 2014 every listed company shall
have---------

A. Chartered Accountant B. President C. Whole time key managerial

personnel

60 Mr. M was appointed as a MD of XYZ Ltd for a period of 5 years from 1 january2013 . His services were
terminated from 1 August 2014 by paying compensation for the loss of office as prescribed. Later, it was
found that Mr. M was involved in many corrupt practices in company during his tenure of office. After
investigation he was found guilty. Advice the company whether the compensation paid to him can be
recovered
A. Yes B. No

61 Mr. Y, an ordinary director of the company was removed by the company before the expiry of his term. Mr
Y demanded compensation from the company for loss of office. Advise whether the company is liable to
pay compensation to Mr. Y
A. Yes B. No

62 Mr. J a director was being paid remuneration in excess of the prescribed limit. On scrutiny of the accounts
it was found that company has paid to Mr. J a total sum of Rs. 1.20 lakhs in excess of the remuneration
sanctioned. Can Mr. J keep the excess remuneration so received?

A. Yes B. No

63. In addition to the above question, under what conditions waiver of excess compensation can be done?
A. If on an application to CG, CG permits the B. Waiver can be done in general meeting
waiver

64. As per Schedule V , a company having effective capital of Rs. 100 crore or more , but less than Rs. 250 crore
may pay to its managerial person , a maximum remuneration of Rs. 120 lakh per year
A. TRUE B. FALSE

Answers
1. B 2. D 3. C 4. D 5. D 6. B
7. D 8. D 9. B 10. A 11. D 12. B
13. D 14. C 15. D 16. D 17. B 18. D

© CA Darshan D. Khare
 Chapter 3 Directors: Appointment & Remuneration of Managerial Person

19. A 20. A 21. B 22. B 23. A 24. B

(no appointment for a term (no company shall appoint a person as MD or WTD or
exceeding 5 years at a time) manager who is below the age of 21 years) 3.9
25. D 26. A 27. C 28. D 29. D 30. A
(every listed company and every other public company having paid
up share capital of Rs 10 crore or more shall have whole time key
managerial personnel)
31. C 32. B 33. C 34. B 35. D 36. D
37. B 38. D 39. B 40. D 41. A 42. C
43. D 44. A 45. B 46. D 47. A 48. A
(the limits shall be doubled if the (Rs. 120 lakhs plus 0.01% of the effective
resolution passed by the shareholders is share capital in excess of Rs. 250 crores)
a special resolution)
49. B 50. A 51. B 52. A 53. B 54. D
(Services (According to section 202 of the Companies Act, 2013 compensation can be
rendered paid only to a Managing director, whole time director and Manger. Amount
by him are of compensation cannot exceed the remuneration which he would have earned
of a if he would have been in the office for the unexpired term of his office or 3
professiona years whichever is shorter)
l nature)
55. B 56. A 57. D 58. B 59. C 60. B
61. B 62. B 63. A 64. B
(The compensation cannot be paid to an (The company cannot waive
ordinary director) the recovery of excess
remuneration)

© CA Darshan D. Khare