Special Resolution under clause (ii) of regulation 17(6) (e) of LODR Reg...

Whether Special Resolution is to be passed if total remuneration paid to all executive promotor directors exceeds 5% of the net profits of a listed company under LODR?

SEBI held that in case if the aggregate remuneration payable to all executive promoter directors exceeds 5 per cent of the net profits, the Company shall be required to pass a special resolution under clause (ii) of regulation 17(6) (e) of LODR Regulations, subject to the condition that such approval of the shareholders shall be valid only till the expiry of the term of such directors.

 Manaksia Aluminum Company Limited raised the  following question with SEBI  

In terms of regulation 17(6)(e) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (10DR Regulations’), it is understood that in case the listed entity has one executive promoter director, it can pay upto 2.5% of the net profits or rupees 5 crore, whichever is higher, without passing a special resolution.

 In case of more than one such director in the entity, there is only a limit of 5 per cent of the net profits and absolute limit is not specified.

whether the Company shall be required to pass a special resolution under clause (ii) of regulation 17(6) (e) of LODR Regulations for appointment of one more executive promoter director if the aggregate remuneration payable to all executive promoter directors exceeds 5 per cent of the net profits or an absolute aggregate limit of INR 5 crore shall also become applicable as mentioned in clause (i) of the said regulations.

 

clause (ii) of regulation 17(6) (e) of LODR Regulations prescribes only a percentage limit (i.e. where there are more than one executive directors who are promoters or members of the promoter group, the aggregate annual remuneration to such directors exceeds 5 per cent of the net profits of the listed entity) and no absolute limit has been specified.

In case if the aggregate remuneration payable to all executive promoter directors exceeds 5 per cent of the net profits, the Company shall be required to pass a special resolution under clause (ii) of regulation 17(6) (e) of LODR Regulations, subject to the condition that such approval of the shareholders shall be valid only till the expiry of the term of such directors.

It may also be noted that the above views are expressed by SEBI only with respect to the clarification sought in your letter under reference with respect to the LODR Regulations and do not affect the applicability of any other law or requirements of any other SEBI Regulations, Guidelines and Circulars administered by SEBI or of the laws administered by any other authority.