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Loss making cos need not seek govt nod to pay high salaries

Press Trust of India  |  New Delhi 

Listed companies making losses or earning inadequate profits will not have to seek government permission to pay high salaries to their managerial staff.

"...No approval of central government will be required by the listed companies and their subsidiary companies, which are not having profits or having inadequate profits for payment of remunerations exceeding Rs 4 lakh per month," the Corporate Affairs Ministry said in a statement.

Earlier, such companies were required to obtain government's permission for paying remuneration in excess of Rs 4 lakh per month.

The new norms, which have come into effect from July 14, 2011, said Diljeet Titus, senior partner of law firm Titus and Co, "will help in attracting right professionals, besides aligning the Indian corporate regulations with the global norms".

The move, said SMC Global Securities Head Research Jagannadham Thunuguntla, "will remove procedural bottlenecks. It will also ensure that talented persons are hired at right kind of salaries".

The loss making companies, however, will have to seek the permission to pay a monthly remuneration of over Rs 4 lakh is the person concerned is not a graduate professional or has direct or indirect interest in the capital of the company.

The relaxation of norms, according to MCA, is a step "to promote development of Indian corporate sector and another step towards simplification of procedure under the Companies Act, 1956".

The government is trying to update company law and proposes to take up for consideration and passage the new Companies Bill in the forthcoming monsoon session of Parliament. The Bill will replace the Companies Act of 1956.

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First Published: Tue, July 19 2011. 21:02 IST