Govt for tough pay disclosure norms for company directors

Listed companies need to explain the rationale behind salaries and raises given to top management personnel

Companies will have to disclose the details of directors on their boards, including their appointments, remuneration and interests among others, if the draft rules under the newly-enacted Companies Act are finalised.

According to the second tranche of draft rules put out in the public domain by the corporate affairs ministry, companies will have to go through various authorities such as the income-tax department, the Securities and Exchange Board of India and stock exchanges in case of mergers and acquisitions. The draft rules also propose to make it mandatory for listed companies to explain the rationale behind salaries and raises given to top management personnel in vis-a-vis the companies’ business performance.

Under the new Companies Act, firms need to provide the ratio of the top management remuneration and the median employee salary on a yearly basis. Besides, listed firms are required to disclose the percentage increase in remuneration of each director and CEO as well as the percentage rise in the median compensation of employees in the financial year.

Earlier this month, the ministry had proposed rules for 16 chapters of the new legislation. The draft rules cover eight more chapters for implementation of the Companies Act, 2013.

While the new Act has 470 sections spread across 29 chapters, the ministry has so far released draft rules for 24 chapters. Draft rules for the remaining chapters are expected to be issued by the first week of October.

The latest tranche of draft rules will be open for public comments till October 19. These  cover chapters on the National Company Law Tribunal and Appellate Tribunal, Appointment and Remuneration of Managerial Personnel, Compromises, Merger and Amalgamations and Prospectus and Allotment of Securities.

A main feature of the new legislation is the setting up of the National Company Law Tribunal (NCLT) and Appellate Tribunal. NCLT is set to replace the Company Law Board. Appeals against the orders of NCLT will be heard by the National Company Law Appellate Tribunal.

Draft norms have also been issued for chapters such as Special Courts (Mediation and Conciliation Panel), Registered Valuers, and Companies authorised to register under this Act and Management and Administration