Appointment of Managing Director under Company Law

RUTU SHAH , Last updated: 27 May 2020
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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.

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

Appointment of Managing Director under Company Law

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	Schedule-V

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 Pre- Requites 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 a 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: A certified true copy of Board resolution
6.	File Form DIR-12 within 30days of appointment. Two DIR-12 will be filled, First for the 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
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.
10.	In case of Special Resolution, file a copy of Special Resolution along with explanatory statement in form MGT-14.
11.	In case of Listed Company, submit a 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

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 the provision of Section 117(3)(C).

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.