Appointment of MD

Others 912 views 3 replies

Pankaj Sachar

CA Practice

44 Points Posted on 27 March 2009

My query is that a public company A is having Executive Director who is not drawing any salary from the Company A. He is also a business head of International Company B which is A SUBSIDIARY of Company A located outside India and is drawing a salary from B. Now a company A proposes to appoint him as MD.He would be devoting full time & attention in the development of International business, and his presence which in general will be outside India and very less in India. He was not in India last year.

He will not be getting remuneration from A & will continue drawing salary from International company B.
Keeping in view the above facts, we understand that provisions u/s 309 (6) and particularly conditions mentioned in part 1 (e) of schedule XIII of Companies Act, places restriction in appointment of MD in the above mentioned scenario.

Being the MD is it justified if he is not getting any remuneration from Company A

Request to give some suggestions or thoughts in this matter that whether such appointment can be made under Companies Act.

Replies (3)

Muralidharan

Self Employed

1035 Points Posted on 27 March 2009

Originally posted by :Pankaj Sachar
"	My query is that a public company A is having Executive Director who is not drawing any salary from the Company A. He is also a business head of International Company B which is A SUBSIDIARY of Company A located outside India and is drawing a salary from B. Now a company A proposes to appoint him as MD.He would be devoting full time & attention in the development of International business, and his presence which in general will be outside India and very less in India. He was not in India last year. He will not be getting remuneration from A & will continue drawing salary from International company B. Keeping in view the above facts, we understand that provisions u/s 309 (6) and particularly conditions mentioned in part 1 (e) of schedule XIII of Companies Act, places restriction in appointment of MD in the above mentioned scenario. Being the MD is it justified if he is not getting any remuneration from Company A Request to give some suggestions or thoughts in this matter that whether such appointment can be made under Companies Act.	"

Sir Your query is an excellent one. It forced me to scurry for the cos act book. Appointment and payment of remuneration to Managing Directors / Whole time Directors are covered under 198, 269, 309 and 310 of the companies act read with Schedule XIII. In your case Part 1(3) (appointment clause) of Schedule XIII comes into play which had been rightly pointed out by you. As such the company cannot appoint Mr.A as Managing Director of the Company. This is because he is not a resident in India during the past year and will not be residing in India even after such appointment. Please note that if your company is in a Special Economic Zone as notified by the Government then Part I of Schedule XIII is not applicable. Refer Explanation II in Schedule XIII. with regards Muralidharan

Muralidharan

Self Employed

1035 Points Posted on 27 March 2009

Originally posted by :Pankaj Sachar
"	My query is that a public company A is having Executive Director who is not drawing any salary from the Company A. He is also a business head of International Company B which is A SUBSIDIARY of Company A located outside India and is drawing a salary from B. Now a company A proposes to appoint him as MD.He would be devoting full time & attention in the development of International business, and his presence which in general will be outside India and very less in India. He was not in India last year. He will not be getting remuneration from A & will continue drawing salary from International company B. Keeping in view the above facts, we understand that provisions u/s 309 (6) and particularly conditions mentioned in part 1 (e) of schedule XIII of Companies Act, places restriction in appointment of MD in the above mentioned scenario. Being the MD is it justified if he is not getting any remuneration from Company A Request to give some suggestions or thoughts in this matter that whether such appointment can be made under Companies Act.	"

This is In continuation of my earlier reply to your query. I think that with the approval of the Central Government you can appoint him as MD. This is because you will not be satisfying the conditions laid down under Schedule XIII of the Act.

Pankaj Sachar

CA Practice

44 Points Posted on 27 March 2009

Originally posted by :Muralidharan

Originally posted by :Pankaj Sachar

"
My query is that a public company A is having Executive Director who is not drawing any salary from the Company A. He is also a business head of International Company B which is A SUBSIDIARY of Company A located outside India and is drawing a salary from B. Now a company A proposes to appoint him as MD.He would be devoting full time & attention in the development of International business, and his presence which in general will be outside India and very less in India. He was not in India last year.
He will not be getting remuneration from A & will continue drawing salary from International company B.
Keeping in view the above facts, we understand that provisions u/s 309 (6) and particularly conditions mentioned in part 1 (e) of schedule XIII of Companies Act, places restriction in appointment of MD in the above mentioned scenario.

Being the MD is it justified if he is not getting any remuneration from Company A

Request to give some suggestions or thoughts in this matter that whether such appointment can be made under Companies Act.
"

This is In continuation of my earlier reply to your query. I think that with the approval of the Central Government you can appoint him as MD. This is because you will not be satisfying the conditions laid down under Schedule XIII of the Act.

Thanks. Please reply if being the MD is it justified if he is not getting any remuneration. Should the company enter into an agreement with the MD in such case?