In exercise of the powers conferred by sub sections 1 and 2 of section 467 of the Companies Act,

## Report on Amendments to Schedule V of the Companies Act, 2013 **1. Executive Summary:** This report analyzes a notification from the Ministry of Corporate Affairs, dated March 18, 2021, which amends Schedule V of the Companies Act, 2013. The core purpose of this amendment, as inferred from the text, is to revise the remuneration guidelines for managerial persons and extend these guidelines to other directors, specifically non-executive and independent directors. Key changes include revised limits for yearly remuneration based on a company's effective capital and inclusion of non-executive and independent directors within the scope of the remuneration guidelines. **2. Introduction:** This report aims to provide an informative overview of the amendments to Schedule V of the Companies Act, 2013, as detailed in the Ministry of Corporate Affairs notification dated March 18, 2021. The analysis is based solely on the information presented in the provided policy text. **3. Policy Overview:** * **Original Policy:** Schedule V of the Companies Act, 2013. * **Core Objective(s):** As inferred from the provided text, the amendment aims to: * Revise and update the remuneration limits payable to managerial personnel based on the effective capital of the company. * Extend the applicability of these remuneration guidelines to non-executive and independent directors. **4. Background and Rationale:** This is an amendment to existing legislation, Schedule V of the Companies Act, 2013. The likely reason for this specific amendment, based on the provided text, is to address the need for updated and more inclusive guidelines regarding remuneration for company directors. Specifically, it appears to broaden the scope of Schedule V to include non-executive and independent directors, suggesting a move towards greater transparency and regulation of director compensation across different roles. The revision of remuneration limits based on effective capital suggests an effort to align compensation with company performance and scale. **5. Key Provisions / Changes:** This section focuses on the changes introduced by the amendment: * **Specific Part of Original Policy Changed:** Part II of Schedule V of the Companies Act, 2013, under the heading "REMUNERATION." Specifically, Sections I, II, and III are amended. * **New Rules/Provisions:** * **Section I:** Includes "other director or directors" alongside "managerial person or persons" in the first paragraph. * **Section II:** Includes "or other director" alongside "managerial person" wherever it occurs. Table A, which specifies remuneration limits, is entirely replaced with a new table providing different limits based on the company's effective capital. The new table outlines limits for both "managerial person" and "other director." * **Section III:** Includes "or other director" or "other directors" alongside "managerial person" and "managerial persons" (with a noted exception). An explanation is added defining "other director" as a "non-executive director or an independent director." * **Difference/Effect of Changes:** * The inclusion of "other directors" (defined as non-executive and independent directors) means that these directors are now subject to the remuneration limits and guidelines specified in Schedule V. This expands the scope of the regulation beyond just managerial personnel. * The revised Table A significantly alters the permissible remuneration limits. The yearly remuneration payable has been differentiated for managerial persons and other directors, based on the effective capital. A fixed amount and a percentage of effective capital beyond a certain limit (Rs. 250 crores) is allowed. **6. Target Audience and Stakeholders:** Based on the provided text, the directly affected parties are: * Companies governed by the Companies Act, 2013. * Managerial persons. * Non-executive directors. * Independent directors. * Shareholders, as the amendment impacts corporate governance and executive compensation. **7. Implementation Aspects (Inferred):** * **Responsible Agency/Bodies:** Ministry of Corporate Affairs (as the issuing authority). Companies are responsible for adhering to the amended Schedule V. * **Timelines/Procedures:** The amendment came into effect on March 18, 2021 (the date of the notification). The effective date for compliance with the amended remuneration limits would likely coincide with the financial year of the companies. * **Specific to Changes:** Companies need to review and adjust their remuneration policies and contracts for managerial personnel, non-executive directors, and independent directors to ensure compliance with the revised limits. **8. Expected Outcomes / Impact of Changes:** The likely intended outcomes of these specific changes introduced by the amendment text are: * **Greater oversight and regulation of compensation for non-executive and independent directors**, leading to potentially more responsible and transparent corporate governance. * **Alignment of director compensation with company size and performance**, as the remuneration limits are now tied to the company's effective capital. * **Increased accountability for companies in setting director compensation**, due to the clearer and more defined limits. **9. Conclusion:** The amendments to Schedule V of the Companies Act, 2013, as detailed in the Ministry of Corporate Affairs notification dated March 18, 2021, represent a significant update to the regulation of director remuneration. By extending the scope to include non-executive and independent directors and revising the remuneration limits based on effective capital, these changes aim to promote greater transparency, accountability, and alignment of compensation with company performance. This amendment is significant for companies, directors, and shareholders alike, as it impacts corporate governance practices and executive compensation structures.

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