SECTION: 196 - APPOINTMENT OF MANAGING DIRECTOR, WHOLE-TIME DIRECTOR OR MANAGER
Updated: May 11, 2022
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.