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Appointment of Managing Director (New Person)

The article explains Rules and Section under Company Law Applicable to Appointment of Managing Director, Definition of Managing Director under Section 2(54) of Companies Act, 2013, Important Pre- Requites for Appointment of Director as Managing Director under Companies Act, 2013, Procedure for Appointment of Director as Managing Director (MD) and FAQ on Appointment of Director as Managing Director.

Appointment of Managing Director

Rules and Section under Company Law Applicable to Appointment of Managing Director

Sr. No. Particular Reference
1 Applicable Section(s) of the Companies, Act,2013 Section 196
2 Applicable Rule(s) of the Companies, Act,2013 Appointment and Remuneration of Managerial Personnel Rules, 2014 Appointment and Qualifications of Directors) Rules, 2014 Meetings of Board and its Powers) Rules, 2014
3. Schedule-V Schedule-V (Not applicable to Private Company)
 

Definition of Managing Director under Section 2(54) of Companies Act, 2013

Managing director means a director who,

  • by virtue of the articles of a company or
  • an agreement with the company or
  • a resolution passed in its general meeting, or
  • by its BOD, is entrusted with substantial powers of management of the affairs of the company and includes a director occupying the position of managing director, by whatever name called

Important Prerequisites for Appointment of Director as Managing Director under Companies Act, 2013

1. Whole-time key managerial personnel shall not hold office in more than one company except in its subsidiary company at the same time.

However, key managerial personnel can be a director of any company with the permission of the Board.

Company may appoint or employ a person as its managing director, if he is the managing director or manager of one, and of not more than one, other company subject to,

• such appointment or employment is approved by a resolution passed at a meeting of the Board with the consent of all the directors present at the meeting

• specific notice has been given to all the directors

2. Maximum Tenure: No company shall appoint or re-appoint any person as its managing director, whole-time director or manager for a term exceeding five years at a time and no re-appointment shall be made earlier than one year before the expiry of his term.

3. Appointment of a person who has attained the age of seventy years may be made by passing a special resolution in which case the explanatory statement annexed to the notice.

4. The notice convening BM or GM for considering such appointment shall include the terms and conditions of such appointment, remuneration payable and such other matters including interest, of a director or directors in such appointments, if any

5. In case of private company - Sub-section (4) and (5) of Section 196 shall not apply

 

Procedure for Appointment of Director as Managing Director (MD)

1. Nomination and Remuneration Committee shall recommend the appointment and remuneration payable to MD to Board of Directors, if any
2. Obtain consent in Form DIR-2 from the person who is proposed to be appointed as MD. Obtain a declaration in form DIR-8 from the person who is proposed to be appointed as MD that he is not disqualified to become a Director
3. Hold Board Meeting to
• appoint a person as an additional Director and fix terms and conditions of appointment including remuneration and issue an appointment letter.
• Fix day, date, time for General Meeting
4. In case of Listed Company, submit a disclosure of appointment to the stock exchange within 24 hours from the Board meeting and the same will be published on the website of the Company.
5. File a copy of Board Resolution in Form MGT-14 u/s 117(3)(c) of the companies act, 2013 within 30 days of passing Resolution. Attachment: Certified true copy of Board resolution
(For All Companies including Private)
6. File Form DIR-12 within 30days of appointment.
Two DIR-12 will be filled, First for appointment of an additional Director and
second for change in designation from an addition Director to MD
Attachment: DIR-2 Certified true copy of Board resolution
7. File Particular of appointment of MD within 60 days of appointment in Form MR-1.
Attachment: Certified true copy of Board resolution Certified true copy of Members resolution DIR-2
(Not applicable to Private Company)
8. Make entries in register of Directors and KMP and in form MBP-4
9. Hold a general Meeting and pass Ordinary Resolution/ Special Resolution, as the case may be.(Not applicable to Private Company)
10. In case of Special Resolution (If the person so appointed has attained the age of 70 years), file a copy of Special Resolution along with explanatory statement in form MGT-14
11. In case of Listed Company, submit disclosure of proceeding of the meeting to stock exchange within 24 hours from the general meeting and the same will be published on the website of the Company
12. In case of Listed Company, submit details regarding voting result within 48 hours from the general meeting and the same will be published on the website of the Company

An individual can be a managing director of two companies, but an individual cannot be a whole-time director of more than one company.

FAQ on Appointment of Director as Managing Director

1. Whether MD can be appointed as Director in any other Company?

Yes

2. Whether a private Limited Company required to file MGT- 14 in case of variation in term of appointment of Managing Director?

YES. As per provision of Section 117(3)(C).

3. Whether Section 197 & Schedule V applicable on Private Limited Company?

No

3. What is limit of remuneration of KMP for Private Limited Companies?

There is no limit on remuneration for Private Limited Companies. They can pay any amount of remuneration without comply with provision of Section 197 and Schedule V.

4. Whether there is any need of General Meeting approval for appointment of MD/WTD in Private Limited Company?

Private Limited Company can designate its Director as MD/WTD without approval of share holder only by passing of Board Resolution.

Due to Exemption Section 196(4) shall not be applicable on Private Limited Companies

Board Resolution for Appointment of additional director

APPOINTMENT OF ADDITIONAL DIRECTOR

RESOLVED THAT pursuant to Section 161(1) of the Companies Act 2013 read with Rule,8, 9 and 14 of the Companies (Appointment and Qualification of Directors) Rules, 2014 and other applicable provisions of the companies Act 2013 (including any modification or re-enactment thereof), and provisions of Article of Association of the Company, Mr. ABC (DIN- ) be and hereby is appointed as an Additional Director on the Board of Directors of the Company with effect from _____________.

RESOLVED FURTHER THAT He shall hold office until the next Annual General Meeting ('AGM') or the last date on which the AGM should have been held, whichever is earlier;

RESOLVED FURTHER THAT all the director of the company be and is hereby authorized to sign the and file DIR -12 with the Registrar of Companies, Ministry of corporate Affairs, and do all other deeds, things and acts that are necessary to the appointment of the aforesaid person as an additional director of the company.

Board Resolution for Change of Designation From Additional Director To Managing Director

Change Of Designation From Additional Director To Managing Director

"RESOLVED THAT pursuant to the provisions of Section 196 and other applicable provisions of the Companies Act, 2013 and the rules made thereunder (including any statutory modification(s) or re-enactment thereof for the time being in force), the consent of the Board of Directors of the Company be and is hereby accorded to change the designation of Mr.ABC DIN:), from Additional Director to the Managing Director of the Company with effect from______________________ on the terms and conditions as mentioned in the Agreement as may be executed between the parties from time to time in this respect.

RESOLVED FURTHER THAT all the Directors of the Company be and are hereby severally authorized to file necessary forms with the Registrar of Companies (Ministry of Corporate Affairs) and to do all such acts, deeds and things as may be necessary and thereto.'

Disclaimer: The entire contents of this document have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation. In No Event Shall I Shall Be Liable For Any Result Arising Out Of Or In Connection With the Use of the Information.


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Category Corporate Law, Other Articles by - RUTU SHAH 



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