The Government of India has notified a key amendment to the Companies Act, 2013, revising the remuneration limits for directors of public limited companies. The changes, effective from November 1, 2025, allow greater flexibility for companies to compensate executive and non-executive directors while maintaining transparency and shareholder oversight. Under the revised Section 197 of the Act, public companies may now pay directors up to 15% of the net profits of the company without seeking prior central government approval—up from the earlier cap of 11%.

For companies with inadequate or no profits, director remuneration must now be approved by shareholders via a special resolution and disclosed in the board’s report with justification for the compensation structure. Additionally, the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, have been updated to include new disclosure formats, requiring public companies to publish detailed breakdowns of remuneration, performance criteria, and comparison with industry benchmarks in their annual reports. This measure aims to prevent disproportionate payouts and align director compensation with long-term company performance and governance standards.

The government has also emphasized greater transparency for independent and non-executive directors, who are now entitled to receive sitting fees, commission, and reimbursement of expenses, but must declare all sources of compensation in advance, including those from group companies or consulting roles. Non-compliance with the revised limits could result in penalties, clawback of excess payments, and disqualification under Section 164. Legal and financial experts believe this reform will encourage greater professionalism and accountability in boardrooms, while ensuring companies retain the flexibility to attract top talent in a competitive market.