Section 196 of ca 2013
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
04 July 2014
According to Section 196 of Companies Act, 2013 Managing Director of all companies can be appointed only for a term of five years . Earlier this [provision was not applicable to private companies. in that case the period of managing director for five years will counted from 1 April 2014 ( Applicability of THIS SECTION) or before that ?
05 July 2014
Appointment of Managing Director is not compulsory for Private Company as section 203 is not applicable on Private Company. Still if Private Company appoints MD then such Private Company shall be governed by the provisions of section 196.
There is no compulsion to fix the term from 01.04.2014. Whenever you appoint MD through board resolution, you may fix his term form next 5 years starting from the date of board meeting.
There is no compulsion to fix the term from 01.04.2014. Whenever you appoint MD through board resolution, you may fix his term form next 5 years starting from the date of board meeting.
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Querist : Anonymous
Querist :
Anonymous
(Querist)
09 July 2014
Thanks for your reply sir. in case of our company MD was appointed in year 1984 and his term was not fixed . Now as section 196 of CA 2013 has now become applicable for private companies we can appoint MD only for five years. Shall we have to pass a Board resolution stating his term for five years starting from 1 April 2014 or will it be counted earlier from 1st April 2013 . Please guide.
Querist : Anonymous
Querist :
Anonymous
(Querist)
09 July 2014
Thanks for your reply sir. in case of our company MD was appointed in year 1984 and his term was not fixed . Now as section 196 of CA 2013 has now become applicable for private companies we can appoint MD only for five years. Shall we have to pass a Board resolution stating his term for five years starting from 1 April 2014 or will it be counted earlier from 1st April 2013 . Please guide.
23 July 2025
Under Section 196 of the Companies Act, 2013, there are certain provisions regarding the appointment of a Managing Director (MD), including the term of appointment. However, for private companies, this section has a slightly different implication, which we can discuss below:
Key Points of Section 196 (Companies Act, 2013):
Term of Appointment:
As per Section 196(1), a Managing Director (MD) can only be appointed for a maximum term of 5 years.
Reappointment is allowed, but the term for the MD can’t exceed 5 years in one go.
Applicability to Private Companies:
Section 196 of the Companies Act, 2013, is applicable to all companies, including private companies.
However, Section 203 (which deals with the appointment of key managerial personnel such as MD, CEO, CFO, etc.) is not applicable to private companies unless specified in the Articles of Association (AoA) of the company.
Therefore, the provision in Section 196 about the term of appointment applies to private companies only if the company has appointed a Managing Director (MD).
Issue with the Existing MD Appointment (1984):
In your case, since the MD was appointed in 1984, and the term was not fixed, you are now dealing with the application of Section 196 under the Companies Act, 2013.
According to the 2013 Act, the term of MD can only be fixed for a maximum period of 5 years.
The effective date of applicability of Section 196 is 1 April 2014, and Section 196 applies to all MDs going forward, whether appointed before or after this date.
How to Apply This to Your Situation?
For the existing MD who was appointed in 1984, and the term was not fixed, you will need to pass a board resolution that:
Fixes the term of the MD’s appointment for 5 years, starting from the date of the resolution (which could be any date after 1 April 2014).
You are not required to set the term starting from 1 April 2014. It can be any date post-1 April 2014 as long as the term is set for 5 years.
Key Steps to Follow:
Pass a Board Resolution: The board needs to pass a resolution specifying that the MD’s term is fixed for 5 years from the date of the board meeting. This is important to comply with Section 196.
Filing with ROC: Ensure the resolution is filed with the Registrar of Companies (ROC), as per the requirements.
No Need for Retrospective Term Calculation: The term does **not need to be counted from 1 April 2014 or any earlier date. The term will simply be counted from the date of appointment/board resolution for a period of 5 years.
Conclusion:
If your company wishes to comply with the provisions of Section 196 for the MD appointment, you will need to pass a board resolution specifying the term of 5 years for the MD starting from the date of the board resolution.
The term does not need to start from 1 April 2014 or any earlier date unless you specifically want to make that the start date.
Key Points of Section 196 (Companies Act, 2013):
Term of Appointment:
As per Section 196(1), a Managing Director (MD) can only be appointed for a maximum term of 5 years.
Reappointment is allowed, but the term for the MD can’t exceed 5 years in one go.
Applicability to Private Companies:
Section 196 of the Companies Act, 2013, is applicable to all companies, including private companies.
However, Section 203 (which deals with the appointment of key managerial personnel such as MD, CEO, CFO, etc.) is not applicable to private companies unless specified in the Articles of Association (AoA) of the company.
Therefore, the provision in Section 196 about the term of appointment applies to private companies only if the company has appointed a Managing Director (MD).
Issue with the Existing MD Appointment (1984):
In your case, since the MD was appointed in 1984, and the term was not fixed, you are now dealing with the application of Section 196 under the Companies Act, 2013.
According to the 2013 Act, the term of MD can only be fixed for a maximum period of 5 years.
The effective date of applicability of Section 196 is 1 April 2014, and Section 196 applies to all MDs going forward, whether appointed before or after this date.
How to Apply This to Your Situation?
For the existing MD who was appointed in 1984, and the term was not fixed, you will need to pass a board resolution that:
Fixes the term of the MD’s appointment for 5 years, starting from the date of the resolution (which could be any date after 1 April 2014).
You are not required to set the term starting from 1 April 2014. It can be any date post-1 April 2014 as long as the term is set for 5 years.
Key Steps to Follow:
Pass a Board Resolution: The board needs to pass a resolution specifying that the MD’s term is fixed for 5 years from the date of the board meeting. This is important to comply with Section 196.
Filing with ROC: Ensure the resolution is filed with the Registrar of Companies (ROC), as per the requirements.
No Need for Retrospective Term Calculation: The term does **not need to be counted from 1 April 2014 or any earlier date. The term will simply be counted from the date of appointment/board resolution for a period of 5 years.
Conclusion:
If your company wishes to comply with the provisions of Section 196 for the MD appointment, you will need to pass a board resolution specifying the term of 5 years for the MD starting from the date of the board resolution.
The term does not need to start from 1 April 2014 or any earlier date unless you specifically want to make that the start date.
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