PROCEDURE FOR APPOINTMENT OF MANAGING DIRECTOR

A Managing Director is a Director who has substantial powers of management of the affairs of the company. Meaning thereby, a person needs to be appointed Managing Director before being appointed as Managing Director (herein after referred to as MD). The provisions for the appointment of Managing Director are mentioned below.

1. CONDITIONS FOR APPOINTMENT

A company is not allowed to appoint a MD and Manager at the same time. In simple words, a company can either have MD or Manager.

A person can be appointed as MD only for a term of 5 years. The person so appointed can not be re-appointed during the period when there is one year left in the completion of appointment term.

The person should be resident of India. [Resident in India includes a person who has been staying in India for a continuous period of not less than twelve months immediately preceding the date of his appointment as a managerial person and who has come to stay in India for taking up employment in India or for carrying on a business or vacation in India].

This condition shall not apply to the companies in Special Economic Zones as notified by Department of Commerce from time to time. A non-resident in India shall enter India only after obtaining a proper Employment Visa from the concerned Indian mission abroad. For this purpose, such person shall be required to furnish, along with the visa application form, profile of the company, the principal employer and terms and conditions of such person’s appointment.

2. DISQUALIFICATIONS FOR APPOINTMENT

The person willing to be appointed as MD:

Should not be less than 21 Years of age.

Should not be 70 years of age or more. However, the person, who has attained the age of 70 years, may be appointed if Special Resolution is passed in this regard and justification for such appointment is provided in the explanatory statement. The Special Resolution is not required when the votes cast in favour of the motion are more than votes cast against the motion and approval of Central Government is obtained through an application made in this regard.

Should not be an undischarged insolvent or has not at any time been adjudged as an insolvent.

Should not have suspended payment to his creditors or made a composition with them.

Should not have been convicted by Court of an offence and sentenced for a period of more than six months.

Should not have been sentenced to imprisonment for any period, or to a fine exceeding one thousand rupees, for the conviction of an offence under any of the Acts mentioned in Schedule V of the Companies Act, 2013.

Should not have been detained for any period under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974.

3. APPOINTMENT

The Appointment of Managing Director should be done at a meeting of the Board of Directors. The terms and conditions of the appointment and the remuneration should also be approved by the Board.
The remuneration and Terms and Conditions of such appointment should be in accordance with Section 197 of the Companies Act, 2013 (“the Act”) and Schedule V of the Act. If the remuneration and Terms and conditions are not in accordance with Section 197 and Schedule V of the Act, then the appointment should be approved by a resolution at a General Meeting and by the Central Government.

4. FORM

Form MR-1 should be filed within 60 days of the appointment.

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