Section 202 — Compensation for loss of office of managing or whole -time director or manager

(1) A
company may make payment to a managing or whole -time director or manager, but not to any other
director, by way of compensation for loss of office, or as consideration for retirement from office or in
connection with such loss or retirement.
(2) No payment shall be made under sub-section (1) in the following cases, namely:—
(a) where the director resigns from his office as a result of the reconstruction of the company, or of
its amalgamation with any other body corporate or bodies corporate, and is appointed as the managing
or whole-time director, manager or other officer of the reconstructed company or of the body corporate
resulting from the amalgamation;
(b) where the director resigns from his office otherwise than on the reconstruction of the company
or its amalgamation as aforesaid;
(c) where the office of the director is vacated under sub-section (1) of section 167;
(d) where the company is being wound up, whether by an order of th e Tribunal or voluntarily,
provided the winding up was due to the negligence or default of the director;

1. The words “the Central Government or” omitted by Act 1 of 2018, s. 69 (w.e.f. 12-9-2018).
2. The words “this Chapter” omitted by s. 70, ibid. (w.e.f. 12-9-2018).
3. Subs. by s. 70, ibid. for “any of the sections aforesaid” (w.e.f. 12-9-2018).

(e) where the director has been guilty of fraud or breach of trust in relation to, or of gross negligence
in or gross mismanagement of, the conduct of the affairs of the company or any subsidiary company or
holding company thereof; and
(f) where the director has instigated, or has taken part directly or indirectly in bringing about, the
termination of his office.
(3) Any payment made to a managing or who le-time director or manager in pursuance of sub -section
(1) shall not exceed the remuneration which he would have earned if he had been in office for the remainder
of his term or for three years, whichever is shorter, calculated on the basis of the average remuneration
actually earned by him during a period of three years immediately preceding the date on which he ceased
to hold office, or where he held the office for a lesser period than three years, during such period:
Provided that no such payment shall be made to the director in the event of the commencement of the
winding up of the company, whether before or at any time within twelve months after, the date on which
he ceased to hold office, if the assets of the company on the winding up, after deducting the expenses
thereof, are not sufficient to repay to the shareholders the share capital, including the premiums, if any,
contributed by them.
(4) Nothing in this section shall be deemed to prohibit the payment to a managing or whole -time