Z Ltd wants to pay remuneration to their Managing Director in excess of the limits specified in Schedule V as they do not have adequate profits. The Company has defaulted in payment of dues to banks as well as non-conver

As per Section 197 of the Companies Act, 2013 read with Schedule V of the Companies Act, 2013, payment of remuneration in excess of the limits specified in Schedule V requires the approval of the shareholders by way of a special resolution in case of companies having no profit or inadequate profit. However, where there is a default in payment of dues to any bank or public financial institution or non-convertible debenture-holders or any other secured creditor, the prior approval of the bank or public financial institution concerned or the non-convertible debenture holders or other secured creditors, as the case may be, shall be obtained by the Company before obtaining approval in the general meeting. Therefore, in the instant case, Z Ltd should take prior approval of the concerned banks and the non-convertible debenture-holders before placing the resolution before the shareholders at the general meeting.