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Appointment of MD sec 316

Roshni Agrawal (company secretary) (33 Points)

21 August 2010

Ques 1 : In how many public companies an individual become MD?

Ques 2 : In how many private limited companies an individual can become MD ?

Ques 3 : In how many private companies & public companies an individual can become MD?

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26 Replies

(Guest)

Sec 316: Appointment of a person as MD in a public company, if he is already the MD or Manager of one other company. Now the other company may be the Private company or may be the public company

Ans 1 : As per sec 316(2), a person can get appointed as MD of 2 public companies simultaneously with unanimous Board Reolution.

and

As per sec 316(4), a person can get appointed as MD of 2 or more companies with Prior CG 's Approval (in E-Form 25A) + Unanimous Board Resolution.

So there is no limit of no. of companies to become the MD in any company whether it is public or private

if it is private company then law is silent because mostly private company have Manager not MD so about MD in private company law does not say anything and also as per sec 197A there is absolute prohibition on a company to have 1 Manager and 1 MD simultaneously

if there is a public company then sec 316 is applicable

Ajay Mishra (Company Secretary) (74332 Points)
Replied 21 August 2010

Dear Friend

Answerer of all questions: The no. will be count for individual not for company. The provisions says a person cannot appoint in more than two company.

Regards

Ajay Mishra

Anil Kumar (looking for the best avenue) (303 Points)
Replied 21 August 2010

for Q.1 and Q.3 - agree with mukesh and i'm not able to understand ajay mishra's answer.

so far private companies are concerned.

Section 316 does not apply to a private company. Hence, a person may be appointed as

a managing director of more than two private companies and no permission of the

Central Government is required to be obtained in this regard.

[DCA Notification No. GSR

577(E), dated 16 -7-1985]

Roshni Agrawal (company secretary) (33 Points)
Replied 21 August 2010

ok agree , that a person can b MD of 2 pub company and any no of Pvt comp.

As we knw ther is no limit for directorship in Pvt comp ,

so for eg Mr A is director in 2 pub company and 100 PVt comp. Can he bcome MD of all companies ??????? ie Can Mr A bcom MD in 2 pub and 100 pvt comp , without any restriction.

(Guest)

ya, in private company he can get appointed as MD without any restriction

but for public company you have to comply sec 316 and for sec 316 is applicable only when the company in which such person is proposed to be appointed as M.D. is public company and the company where he is already a M.D./ Manager may be Private co. or public co.

thanks

Ajay Mishra (Company Secretary) (74332 Points)
Replied 21 August 2010

Dear Friend

A person can be appointed as MD in more than two private company because section 269 and 316 of the Companies Act, will not apply to private company unless it is subsidiaries of public company.

Regards

Ajay Mishra

Roshni Agrawal (company secretary) (33 Points)
Replied 21 August 2010

so it means that Mr A can , MD of 2 pub comp and 100 pvt comp.

and then abt remuneration , Sch XIII is applicable to pub comp , so Mr A get remuneration with in limit in 2 pub comp , bt he can get any amount in Pvt comp.

plz clarify

Ajay Mishra (Company Secretary) (74332 Points)
Replied 21 August 2010

Dear Roshni

The provisions of appointment and remuneration of MD is not applicable to private company unless your company’s article impose any restrictions.

Regards

Ajay Mishra

(Guest)

ya roshni, you are right

Roshni Agrawal (company secretary) (33 Points)
Replied 21 August 2010

THANKS to all members for clarifying my doubt.

(Guest)

oh!! any time, any time, no prob

thanks

Roshni Agrawal (company secretary) (33 Points)
Replied 21 August 2010

CS Ankur Srivastava (Company Secretary & Compliance Officer) (17848 Points)
Replied 21 August 2010

Dear All,

No public company shall appoint or employ any person as MD, if he is either the MD or Manager or any other Company (Including Private Company).

However, there is an exemption that a Public Company may appoint a person as its MD, with the unanimous approval of the Board, if he is the MD or Manager of one and not more than one Other Company ( Including a Private Company).

However, with the approval of Central Government one person may be MD of more than 2 companies for their functioning as a single unit.

Neha Gupta (PCS) (377 Points)
Replied 21 August 2010

Absolutely agreed with Ankur, as it is clearly specified under 316(2) of the Companies Act, 1956 that his M.D. ship in a Private Company is also taken into consideration.

So, a Person can not a M.D. of more that two Companies (including Private Company) without the prior approval of Central Government.