Can a Nominee Director become an MD ?

Dear Mailika,

A nominee director is neither counted for rotational director nor he is a director liable to retire by rotation He takes care of the interest of the shareholder on whose behalf he is  a nominee

though they are counted for total number of directors in a company while filing annual returns

Hi.....

1. In my opinion a Nominee Director can be appointed as Managing Director of the Company.

2. Normally, a Managing Director is not liable to retire by rotation as well as Nominee Director is also a non-rotational Director

3.Both the Directors are counted for determining the number of Directors

4. Rotational Directors means the Directors of the Company who are liable to retire by rotation at the AGM of the Company and Non-Rotational Directors means the Directors who are not Rotational Directors.

As per section 255 of the Companies Act, 1956 not more than 1/3rd of the total number of Directors can be non-rotational Directors.

Hope this solves your query.

Best Regards

Udit Sharma 

theoritically it may be possible, but practically it does not work out. 

One of the kinds of nominee directors is, a financial institution lending money would like its representative to be on the board of the company. Though liability of nominee directors is the same as that of any other director, by virtue of certain special provisions in the respective acts governing those financial institutions, such nominee directors have been given immunity from action for any liabilty as a director in the company and administrative instructions have been issued to Dept of Comp affairs not to launch any prosecution of nominee directors.

These liberties given is due to the fact that a nominee director does not participate in major affairs of managing the company. 

Considering above facts, it would not appropriate for a company to appoint nominee director as MD! 

@ Sunny : Let me give u an example which gave rise to my query above :-

Our prestigious DMRC is a Company and has 16 Directors in total, out of which 10 are Nominee Directors. Now, one of the Nominee Directors is the MD ( Dr. E Shreedharan )

This is how the concept, along with being a theoretical rule, is actually a practical one too !!

Hi....

Gud one Mallika........

Thanks Udit Sir !!!

Oh good.. information.. but does it happen in a routine fashion? 

Please share any other nominee director of company appointed as an MD..

hey i just took an example of financial institutions representative as nominee... how often does the company appoint him as MD??? can anyone reply??? 

thanks dear

I am not sure about this issue, but the information is so helpful. Can I get the detailed information for this any where. I'd like to have a brief study on this issue.

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@ Mr Denketh 

I had read about the same from the website of DMRC itself. Infact, I have found out some really interesting facts about the issue.  But for a detailed analysis, I will be uploading the same in the form of an article soon on Caclubindia. 

I'll post the link here whenever I upload it.

Thanks !!

Dr E Sreedaran is a full time functional director, so it is an exceptional case wherein a nominee director has been appointed as an MD. But in how many cases do you get to see nominee directors being on board as a full time functional director?????? hardly few.. 

It has been mentioned above that the Nominee Directors are not counted for calculating the proportion of rotational directors.

Please advise where can I find this provision.

Thanks,

Rishi