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Sec 316

nirmala mehta (Chartered Accountant) (57 Points)

02 June 2008

* If a person is Managing Director in a PUBLIC company and subsequently he is appointde as a MD in a PRIVATE company, Should the Private company follow 316 precedure relating to specific notice, Unanimous resolution etc.??

* In the following situations when is Central Govt approval required??

1. Mr. X is MD in two pvt cos. hes appointed as a MD in a public company

2. Mr X is a MD in a pvt. co. hes appointed as a MD in a public co.

3. Mr X is a MD in 1 public company & one private company. hes appointed as a MD in another private company

4. Mr. X is a MD in 1 public co. & 1 pvt co. hes appointed as a MD in another PUBLIC company.

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3 Replies

sai kiran (ca final student) (78 Points)
Replied 02 June 2008

If a person is Managing Director in a PUBLIC company and subsequently he is appointde as a MD in a PRIVATE company, Should the Private company follow 316 precedure relating to specific notice, Unanimous resolution etc.??

ANSWER: NO. 316 IS NOT APPLICABLE WRT APPOINTMENT IN PVT CO.

* In the following situations when is Central Govt approval required??

1. Mr. X is MD in two pvt cos. hes appointed as a MD in a public company

ANS: YES. CG APPROVAL REQUIRED.

2. Mr X is a MD in a pvt. co. hes appointed as a MD in a public co.

ANS: BOARD UNANEMOUS RESOLUTION IS REQUIRED. CG PERMISSION NOT REQUIRED.

3. Mr X is a MD in 1 public company & one private company. hes appointed as a MD in another private company.

ANS. 316 NOT APPLICABLE WRT APPOINTMENT IN PVT CO. SO NEITHER BOARD UNANEMOUS RESOLUTION NOR CG APPROVAL WRT APPOINTMENT IN PVT CO.

4. Mr. X is a MD in 1 public co. & 1 pvt co. hes appointed as a MD in another PUBLIC company.

ANS: CG APPROVAL REQUIRED..

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Ankit kansal (Professional) (43 Points)
Replied 05 June 2008

Dear Friends,

As per Company Act , A person can not be appoiented as a managering director in more then one company in the same time. However he can be appoiented as managering director of another company only if all other directors are agree for the same and only after obtaining the approvel of central government. A person can not hold the office as a MD in more then two companies in thre same time except if CG is satisfied that it is necessary for the better performence of companies to appient a person as MD in two or more companies.on the basis of above explanation it can be said that CG approvel is required for appointment.

Regards,

Ankit kansal

CA NP Mathi Lingan (Practising Chartered Accountant) (98 Points)
Replied 06 June 2008

Sec 316 provides that a MD of a Public Co can be a MD in one more Co that can be a Pvt or Public Co.

A person can be a MD in n No of Pvt Co's, no restriction.

But a MD of a public Co cannot be a MD in more than 2 Co's.

In Q No.3 raised by Nirmala; when a person who is a MD in 1 public Co and 1 pvt Co is appointed as a MD in another pvt co then the provisions of Sec 316(2) are contravened in respect of his appointment in a public co and hence he has to choose to vacate from that public co are 1 pvt co.