Procedure & Requirement Of Appointment Of Managing Director in Private Limited Company

Managing Director Section 2(54) of the Companies Act, 2013, defines ‘managing director’. It stipulates that a “managing director” means 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 Board of Directors, is entrusted with substantial powers of management of the affairs of the company and includes a director occupying the position of managing director, by whatever name called.

Appointment of Managing Director, Whole-Time Director or Manager Section 196 of the Companies Act, 2013

  • A company can appoint either Managing Director or Manager, not both {Sub – section (1)}.
  • MD, WTD, and Manager can be appointed for maximum tenure of 5 years. But company may reappoint them for next term of 5 Years or lesser period, before expiry of existing term.
  • But re-appointment cannot be done earlier than one year before expiry of the term. This means, company may re-appoint them for next term in last one year of current term.
  • The minimum age for the appointment for these positions is twenty – one year and normal retirement age is seventy years. (So the person who does not attain age of 21 years can’t appoint as Managerial Personnel).
  • But a person who has attained age of 70 year can be appoint as Managerial Personnel, by passing of Special Resolution in General Meeting, Condition: Explanatory Statement justifying such appointment shall be annexed to the notice of General Meeting for motion of appointment.
  • For appointment of a person who has attained age of 70 year following procedure:
    • Call a Board Meeting
    • Issue notice of General Meeting
    • Pass Special Resolution In General Meeting.
    • File MGT-14 with ROC within 30 days of passing of Resolution.
    • File form DIR-12 and MR-1 with ROC with in 30 days of passing of resolution of appointment.
  • To appoint a person as Managerial personnel:
    • Appointee should not be an un-discharged insolvent nor has any time been adjudged as an insolvent.
    • Appointee has not any time suspended payment to his creditors or has made a composition with them.
    • Appointee should not be a convict of an offence and sentenced for a period of more than six months. {Sub – section(3)

For appointment of Managerial Personnel in private company we have to do following things:

  1. Require to pass Board Resolution.
  2. Require approval of Share Holders in General Meeting.
  3. Follow the provisions of Schedule – V of Companies Act, 2013. (If there is any variance to the conditions specified in the schedule, this appointment shall also be subject to the approval of the Central Government. {Sub – section (3)})

PROCEDURE FOR APPOINTMENT OF MANAGERIAL PERSONNEL IF COMPANY HAS ADEQUATE PROFIT:

a. Issue Notice for Calling Board Meeting. Notice shall include:

  • Terms and conditions of such appointment.
  • Remuneration payable to such Managerial Personnel.
  • Interest of Directors in such appointment.

b. Documents Require from Appointee:

  • Declaration that he is not disqualified to appoint as director. (Secion-152(4).
  • Consent that he is willing to appoint as director.(Section-152(5).
  • Consent that he is willing to appoint as Managing Director.

c. Pass Resolution in Meeting for appointment of Managerial Personnel.

d. File Form MGT-14 within 30 days of passing of resolution. (Secion-179)

e. File Form DIR-12 within 30 days of passing of resolution.

f. File Form MR-1 within 60 days of passing of resolution. (Section-196).

g. GM; which will help after this appointment, Take Approval of Shareholders by passing of resolution.

DRAFT FORMATS ATTACHED BELOW:

  •       Notice Calling Board Meeting.
  •       Agenda of Board Meeting.
  •       Attendance Sheet of Board Meeting.
  •       Leave of Absence, if require.
  •       Declaration under section 152(4)
  •       Consent under section 152(5)
  •       Consent to act as Managerial Personnel.
  •       Draft MD Agreement, if require.
  •       Draft Board Meeting Resolution.
  •        Will explain in my next article Process of filling, filing and attachments of form MR-1.

Leave a Reply

Your email address will not be published. Required fields are marked *