Appointment of Managing Director Under Companies Act 2013
Managing Director: -
Every Company must have Directors and they will be called the Board of Directors (BOD). But all the directors cannot engage in the management of the company due to different reasons. For smooth running of the company they elect one person to manage all the affairs of the company. And the person can be a Manager or a Managing Director but not both at a time.
A Managing Director is a person who is a Whole-Time Director of the company, appointed by the board of Directors to manage the affairs of the company. He/she is one of the Board of Directors (BOD), and he/she must be an individual, that is the Managing director must be a person and not a firm or an organization
There is a difference between a Manager and a Managing Director of the company. It is clear that a Managing Director should be a Director in the 1st place. A Manager need not be a director, he/she is just an employee of the company. There are certain other differences like the number of persons that can be appointed, contract of engagement and disqualifications applicability. The Manager Director of a company will have a contract with company and the Manager does not require such.
The Managing Director plays a duel role. He/she is the authority of the company as director who attends Board meetings and as a Manager, he/she performs the managerial functions of the company also.
• The appointment of a Managing Director is not mandatory for a company.
• But if a Managing Director is appointed:
- o He/ She will be a bridge between the Board and the management actions of the company.
- o He/ She will know the company’s policies better and will execute them with the correct strategic plans and in a rightful manner.
- o Maximum Number of Managing Director that a company can appoint at a time is 2 and not more than that. But in case of a Manager it is only one.
Appointment of Managing Director:-
Who can be appointed as a Managing Director?
• Any individual who is a member of the Board of Directors (BOD).
The law does not specify the qualifications of a person to be a Managing Director. But it does state some disqualification for a person not being a Managing Director. Which are as below:
- • A person who was declared as an insolvent during the appointment or at any time in the past,
- • A person who is not a resident of India
- • A person who has been convicted by court of offense and sentenced for a period more than 6 months
- • A person who suspends or suspended any payment to a creditor at any time in the past
- • The person should not be below 21 years and above 70 years old.
- o But a Person who is above 70 years can be appointed as a Managing Director with a special resolution and approval from the Central Govt, which will be given with proper reason for the appointment of such person.
How a person can be appointed as a Managing Director?
Any Member in the Board can suggest any other Director to be the Managing Director of the company.
- • The Managing Director of a company can be appointed in the General Meeting of the company or at a Board Meeting if the same is approved in the company’s MOA.
- • If the appointment is done in Board Meeting by the Board of Directors, then the same should be approved in the next General Meeting of the company, if not an Extra-ordinary General meeting is to be conducted and the same should be approved.
- o If the person is appointed in the Board Meeting and the same is not approved in the General Meeting the actions done by the Managing directors from the date of appointment to the date of general meeting will be valid unless there is any public interest being effected or fraud involved.
Term of Managing Director:-
- • A person can be appointed as a Managing Director not for a period more than 5 years at the appointment.
- o However, it can be extended after the completion of the term.
- o And the re-appointment of the same person cannot be done earlier than 1 year before the expiry of his term.
Registration of the Appointment of Managing Director:-
• The appointment of a Managing Director should be registered with Registrar of companies in the prescribed Form within 60 days of the appointment.
- o MGT-14 u/s 117(3)(c) of the companies act, 2013 within 30 days of the appointment;
- o DIR-12 u/s 170(2) of the companies act, 2013 within 30 days of the appointment;
- o MR-1 u/s 196(4) of the companies act, 2013 within 30 days of the appointment;
Disclaimer:“The information contained herein is only for informational purpose and should not be considered for any particular instance or individual or entity. We have obtained information from publicly available sources, there can be no guarantee that such information is accurate as of the date it is received or it will continue to be accurate in future. No one should act on such information without obtaining professional advice after thorough examination of particular situation.”
Bala Sankara Chary