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Appointment of an employee directly as a wtd

Smruti (CS&CA) (79 Points)

05 May 2017

Dear Professionals,

One of the Public Unlisted companies wishes to appoint one of it's employee as a director. What is the procedure to be followed by the company for such an appointment?

Can we directly appoint him as a WTD?

Thanks in advance.

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6 Replies

Sudhir Todkar (CS Professional) (1021 Points)
Replied 05 May 2017

If he/she having DIN and NOT disqualified to become a director in any company or in that company can be appointed as a director subject to condition that:

Nomination & Remuneration committee shall identify person who are qualified to become a director and who may be appointed in senior management in accordance with the criteria laid down.

Additional conditions should comply (As mentioned in section 196 & schedule V) if he /she wants to become WTD.

Sudhir Todkar (CS Professional) (1021 Points)
Replied 05 May 2017

1- Convey Board Meeting and pass resolution in that mentioned the terms & conditions of appointment and remuneration of WTD
2- Notice to shareholders to convey GM in that notice mentioned remuneration, tenure & terms and conditions of appointment.
3- In GM pass Ordinary Resolution
4- Before that you need to check whether he/she is not disqualified to become WTD along with Schedule V also
5- If he is appointed as per schedule V no need to get Central Government approval otherwise you should get CG approval if appointed not as per schedule V.
6- File form MR-1 within 60 days from passing Ordinary resolution in GM
7- MR-2 for getting approval of CG is appointed not as per schedule V file.
8- If CG or ordinary resolution is not passed for appointment he should vacate his office when company communicate to him otherwise he should be liable to pay 5K per day until he vacate his office.

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Sudhir Todkar (CS Professional) (1021 Points)
Replied 05 May 2017

No person either employee of the company or any outsiders cannot be appointed as MD/WTD/M Directly..

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Smruti (CS&CA) (79 Points)
Replied 05 May 2017

Thannk you so much for your quick response.

Yes the employee has the DIN and is not disquaified to become a director. So we have to conduct a BM first then propose him as a WTD? and then conduct a GM, is my interpretation correct?

Sudhir Todkar (CS Professional) (1021 Points)
Replied 05 May 2017

Yes, your understanding is correct apart from this you need to check schedule V of the companies act 2013, If he disqualify under schedule V then central government approval is required to appoint him as managerial person in form MR-2 within 90 days.

Smruti (CS&CA) (79 Points)
Replied 05 May 2017

Thank you.

Yes Remuneration is coming as per the Part II of Schedule V. Further Section 160 will have to be complied as well? Rs. 1 lakh deposit and noticce to shareholders and updation on the website?