• Pratham Dave

SECTION: 196 - APPOINTMENT OF MANAGING DIRECTOR, WHOLE-TIME DIRECTOR OR MANAGER

Updated: May 11


INTRODUCTION:


Section 196 of the Companies Act of 2013 governs the appointment of a managing director. However, according to the Companies Act of 2013, it is not required to nominate a Managing Director in a Private Limited Company.


The Board of Directors appoints one of its members to manage the company's obligations as a full-time officer and designates him as the Managing Director.


He serves as the company's CEO. He holds a dual position of authority and accountability. He executes managerial tasks as a manager and attends Board meetings as a director.


Only that individual who is already a director in the company can be nominated as a Managing Director or Whole-time Director. As a result, a non-director cannot be appointed as a Managing or Full-time Director.


APPOINTMENT OF MANAGING DIRECTOR, WHOLE TIME DIRECTOR OR MANAGER:


  • It is not permitted for a corporation to designate both the managing director and the manager at the same time.

  • The Managing Director, whole-time director, and manager can be appointed for a maximum of five years; however, the firm may re-appoint them before the expiry of their current term, but not less than one year before the term expires. This means that a corporation may re-appoint them for the following term in the final year of the current term.

  • The minimum age for these jobs at the time of appointment is twenty-one years, and the retirement age is seventy years. As a result, anyone under the age of twenty-one can be employed as Managerial Personnel.


PROCEDURE FOR APPOINTMENT OF MANAGING DIRECTOR, WHOLE TIME DIRECTOR OR MANAGER:


  • Organize a Board Meeting

  • Give notice of the General Meeting.

  • In the General Meeting, pass a Special Resolution.

  • MGT-14 must be filed with ROC within 30 days of the Resolution's passage.

  • Forms DIR-12 and MR-1 must be filed with ROC within 30 days of the appointment resolution being passed.


THE MANAGING DIRECTOR MUST SATISFY FOLLOWING CRITERIA:


  • He must serve on the Board of Directors.

  • He must be assigned major management powers that he would not otherwise be able to exercise.

  • The general powers to do administrative acts of a routine kind are not to be considered considerable managerial powers.

  • A managing director's management abilities must be exercised pursuant to the oversight, supervision, and direction of the Board of Directors.

  • Anyone who takes on the role of managing director even if they are not designated as such is considered to be a managing director.


INDIVIDUALS NOT TO BE APPOINTED AS MANAGING DIRECTOR:


No entity should appoint, employ, or continue to engage as a managing or full-time director anyone who-

  • is an undischarged bankrupt, or has ever been declared a bankrupt,

  • suspends or has ever suspended payment to his debts, or has ever made a composition with them,

  • is, or has ever been condemned by a Court of a crime official misconduct


POWERS,DUTIES AND RESPONSIBILITIES OF MANAGING DIRECTOR:

  • Being a member of the board of directors’ entails participating in policy-making functions and formulating the Board's objectives.

  • Implement policies established by the Board of Directors.

  • Serve as the mediator between the organisation and the Board of Directors.

  • Communicate and interpret the company's policies to subordinates.

  • Accounts and statistics demonstrating the company's progress and current position must be reviewed and presented to the Board on a regular basis.

  • Appoint high-ranking company officials.

  • Create a compensation and employment strategy based on the company's recognised policies.

  • Plan the company's expansion and development.

  • Meetings with department heads should be scheduled.

  • Encourage strong morale among the company's employees by establishing a sense of belonging.

  • Maintain touch with the government, trade unions, and the community at large, as well as the chamber of business.

  • Maintain a healthy balance between line and staff managers.

  • Approve or reject development plans proposed by senior executives and present them to the Board for ultimate approval.

  • Create a budgetary control system that allows the company's actual performance to be compared to the planned course of action.

  • Supervise the company's manufacturing and sales activities.

  • Pay close attention to consumer satisfaction, which is maintained by the market's continuing supply of goods and services.


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