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Managing Director

Jaideep (Service) (1368 Points)

07 February 2011

Hello Freinds,

One opinion...

Can Managing Director of Indian Public Limited Company act as a CEO of foreign WOS w.r.t. section 316 of the Companies Act,1956.

Regards

Jaideep Pandya

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10 Replies

nidhigoel89 (Company Secretary ) (594 Points)
Replied 07 February 2011

Hello!

I dnt think that there is ny specific restriction in CO. Act, wrt to appointment of MD as CEO in other Co. .................

Others view are solicited.........

Regards

Nidhi

(Guest)

agree with nidhi

Jaideep (Service) (1368 Points)
Replied 07 February 2011

Thanks Member for your valuable suggestion and time.

CS Ankur Srivastava (Company Secretary & Compliance Officer) (17848 Points)
Replied 07 February 2011

Under Section 316(2) a MD can be appointed as MD in only one Company and not more than one, only with the consent of ALL the Directors. It requires unanimous resolution in Board Meeting.

Further, in my opinion, if any person is in full time employment in any one company he cannot be in full time employment in any other company.

1 Like

Jaideep (Service) (1368 Points)
Replied 07 February 2011

Dear Ankur Sir,

I am wondering for that only... However Section has used word "Company" rather "Body Corporate", by this can we interpret that intention of the Act is not to include foreign Company. And. accordingly he can act as a CEO of WOS foreign Company.

Thanks

Jayashree S Iyer (Company Secretary) (3224 Points)
Replied 08 February 2011

WTD as the name suggests is a Whole time Director and he cannot be appointed as a WTD in any other company.

However MD is a person entrusted with substantial powers of management and nowhere in the ACT he has been described as WTD and for the same reason he is allowed under Section 316 to be a MD of one another Company with the consent of all the DIRECTORS. If MD is considered a WTD, then Section 316 itself would not be applicable to him. This is my interpretation.

So I don't find any restriction in the wording of Section 316, with regard to his appointment as CEO of foreign WOS.

Experts please give your opinion.

Sudhir Garg (Service) (236 Points)
Replied 08 February 2011

Dear Ankur

I agree with Jayashree. He can be apppointed as CEO as asked in query.

The question of full employment does not arise as section does not prohibit another appointment but put a condition of approval of all directors.

Further, point of Mr Jai is also considerable whether appointment as MD in foreign company attracts this section provisions??

Regards- Sudhir

1 Like

Jaideep (Service) (1368 Points)
Replied 08 February 2011

Originally posted by : Sudhir Garg
	The question of full employment does not arise as section does not prohibit another appointment but put a condition of approval of all directors.

Valid point.

Thanks- Jaideep

Siddhartha Kulkarni (Advocate ) (33 Points)
Replied 08 February 2011

From the above discussion the following points are arises. I will try to present my views to the best. Any improvement are welcome:

i) Whether the MD can be appointed as the MD or CEO of another company?

YES. The MD of one company can be appointed as the MD of another company provided such appointment shall be made by a resolution passed at the meeting of board of directors of the company with the consent of all the Directors present at the meeting.

ii) Whether the appointment of MD equates to the appointment of CEO?

NO. The basic essence in the appointment of MD is that, first he must be one of the director of the company and secondly he must be entrusted with the substantial power of management by virtue of (a) an agreement with the company or (b) a resolution passed by the company in general meeting or (c) by its Board of directors or, (d) by virtue of its memorandum or articles of association.All the above conditions are totally absent in the appointment of CEO of the company.

iii) The meaning and the scope of “Body Corporate”?

Sec. 2(7) of the Companies Act provides that the term “body corporate" or "corporation" includes a company incorporated outside India but does not include-

(a) a corporation sole;

(b). a co-operative society registered under any law relating to co-operative societies; and

(c) any other body corporate (not being a company as defined in this Act) which the Central Government may, by notification in the Official Gazette, specify in this behalf;

Here it is important to mention that the foreign WOS is not a “corporation sole” but a subsidiary of an Indian company. Thus Sec 316 is also applicable of WOS too.

iv) Lastly appointment of MD in foreign company attracts sec 316 of the CA, 1956?

NO. The appointment of MD in foreign company is not a subject matter of Indian laws. But where the person who is appointed as MD of foreign company is already acts as MD of Indian company sec. 316 comes into fore.

1 Like

Jaideep (Service) (1368 Points)
Replied 08 February 2011

Thank You Siddhartha Sir,

So we can conclude from the above in-depth analysis that, A person who is already acting as MD of Indian Company can act as a MD / CEO in foreign company only in compliance with Section 316 of the Companies Act. Need to pass unanimous resolution in Board Meeting before appointment.

However w.r.t. your point no III, meaning and scope of Body Corporate, I want to point out that, in section 316 word "company " is used.

Whether you want to say here, being subsidary of Indian company, section in the discussion will attract.

Regards

Jaideep Pandya