Managing director is a director who, by virtue of the articles of a company or an agreement with the Company or a resolution passed in its general meeting, or by its BOD, is entrusted with substantial powers of management of the affairs of the corporate and includes a director occupying the position of Managing Director in the Company.
Important Pre- requites for the appointment of Director as Managing Director under Companies Act, 2013
Whole-time key managerial personnel shall not hold office in more than one company except in its subsidiary at the same time. A Company may appoint a person as its Managing Director, if he’s the director or manager of one, and of not more than one, other company and such appointment is approved by a unanimous resolution passed at meeting of Board of directors.
Maximum Tenure: A person shall not be appointed or reappointed as director, whole-time director or manager by a company for a term exceeding five years at a time and no re-appointment shall be made before one year before the expiry of his term.
No company should appoint or continue the employment of any person as managing director, whole-time director or manager who is below the age of twenty-one years or has attained the age of seventy years unless, the appointment of a person who has attained the age of seventy years may be made by passing a special resolution in which case the explanatory statement annexed to the notice;
The notice convening BM or GM for considering such appointment shall include the terms and conditions of such appointment, remuneration payable and such other matters including interest, of a director or directors in such appointments if any
In case of a private company – Sub-section (4) and (5) of Section 196 of Companies Act, 2013 shall not apply
Form needs to be filled in Appointment of Managing Director
MGT-14 u/s 117(3)(c) of the companies act, 2013 within 30 days of the appointment;(not applicable on Private Company)
DIR-12 u/s 170(2) of the companies act, 2013 within 30 days of the appointment;
MR-1 u/s 196(4) of the companies act, 2013 within 60 days of the appointment; (not applicable on Private Company)
SECTION 196: No company shall appoint at the same time a managing director and a manager. A company at a time shall not appoint or re-appoint any person as its managing director, whole-time director or manager for a term exceeding five years.
Conditions for Appointing Managing Directors The following conditions are applicable for the appointment of a director:
He should not have been sentenced to imprisonment for any period, or fined under specified statutes.
He should not have at any time been convicted by a court of an offence and sentenced for a period of more than six months.
He should not be an undischarged insolvent or has at any time been adjudged as an insolvent;
He should have completed Twenty-one (21) years of age, but be less than the age of Seventy (70) years. However, the appointment of person who has attained the age of 70 Years can be made by passing special resolution.
He should be a managerial person in one or more companies drawing remuneration subject to the ceiling specified in Schedule V.
He should be an Indian resident.
Procedure for Appointment of Director as Managing Director (MD)
If applicable, Nomination and Remuneration Committee shall recommend the appointment of Managing Director to Board of Directors.
Convene and hold a Board Meeting, giving notice to all the Directors to pass the following Board resolution:
Appoint such person as Additional Director, if not an existing Director and receive the required documents i.e. DIR 2, MBP 1 & DIR 8.
Appoint such Director as Managing Director of the Company along with agreements stating terms and conditions in respect of such appointment subject to approval at ensuing AGM.
Authorization to any director to file forms with the Company.
In the case of Listed Company, submit a disclosure of appointment to the stock exchange within 24 hours from the Board meeting and the same will be published on the website of the Company within 2 working days.
File a copy of Board Resolution in Form MGT-14 u/s 117(3) (c) of the Companies Act, 2013 within 30 days of passing Resolution. Attachment: Certified true Copy of Board Resolution passed.
File Form DIR-12 within 30 days of appointment. DIR-12 will be filled, first for the appointment of an additional Director and second for change in designation from an addition Director to MD Attachments: DIR-2 & certified true copy of Board resolution.
Make entries in register of Directors and KMP and in form MBP-4.
Hold a General Meeting and pass Ordinary /Special Resolution, as the case may be for the appointment of Managing Director.
In the case of Special Resolution, file a copy of Special Resolution along with an explanatory statement in form MGT-14. Along with form DIR 12 within 30 days and MR 1 within 60 days of such appointment.
In the case of Listed Company, submit a disclosure of proceeding of the general meeting to the stock exchange within 24 hours from the general meeting and the same will be published on the website of the Company within 2 working days.
In the case of Listed Company, submit details regarding voting result within 48 hours from the general meeting and the same will be published on the website of the Company.
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