MANAGING DIRECTOR/ WHOLE TIME DIRECTOR- COMPANIES ACT, 2013
PROVISIONS RELATING TO
MD/ WTD AS PER
COMPANIES ACT, 2013
SECTIONS INVOLVED:
Section
152(2): Save
as otherwise expressly provided in this Act, Every Directorshall be appointed by the company in general
meeting.
Section
170(2)A
return containing such particulars and documents as may be prescribed, of
thedirectors and the key managerial personnel shall be filed with the Registrar
within thirty days from the appointment of every director and key managerial
personnel, as the case may be, and within 30 days of any change taking place.
Section
117(3)(c)A
copy of resolution of the Board of Directors of a company or agreement executed
by a company, relating to the appointment, re-appointment or renewal of the
appointment, or variation of the terms of appointment, of a Managing Directorshall be filed
with the Registrar within thirty days of the passing or making thereof.
Section
161(1):The
articles of a company may confer on its Board of Directors the power to appoint
any person, other than a person who fails to get appointed as a director in a
general meeting, as an additional director at any time who shall hold office up
to the date of the next annual general meeting or the last date on which the
annual general meeting should have been held, whichever is earlier
Section
196:
No company shall appoint or re-appoint any person as its managing director,
whole-time director or manager for a term exceeding five years at a time
Section
197:
Overall Maximum Remuneration and Managerial Remuneration.
EARLIER WAS SECTION 197A, 267, 311, 317, 384, 385, 388 OF THE COMPANIES ACT, 1956
RULES INVOLVED:
Rule
3
of the Companies (Appointment and Remuneration of Managerial Personnel)
Rules,2014
Rules 17
of the Companies (Appointment and Qualification of Directors) Rules, 2014-
Register of directors and key managerial personnel
Rule
18
of the Companies (Appointment and Qualification of Directors) Rules, 2014-
Return containing the particulars of directors and the key managerial personnel
Rule 8 of
the Companies (Appointment and Qualification of Directors) Rules, 2014- Consent
to act as director.
CIRCULARS INVOLVED:
Notification
No. G.S.R. 464(E) dated 5th June 2015
FORMS INVOLVED:
DIR-
12 - Particulars
of appointment of Directors and the key managerial personnel and the changes
among them.
MR-1
- Return
of appointment of MD/WTD/Manager.
MGT–
14 -Filing
of Resolutions and agreements to the Registrar
DIR-
11 – Filing
of resignation with ROC by the Director.
NON APPLICABILITY:
Government
Company:As per NOTIFICATION NO. GSR
463(E)[F.NO.1/2/2014-CL-V], DATED 5-6-2015
:
Section 196 Sub Section 2, 4 & 5 Not applicable
on Government Company.
Section
197 not applicable on Government Company.
Private
Company: As per NOTIFICATION NO. GSR 464(E)
[F.NO.1/1/2014-CL-V], DATED 5-6-2015
Section 196 Sub Section 4 & 5 Not applicable on
Private Company.
Section
197 not applicable on Private Company (Literal Interpretation).
DEFINITION:
Managing Director: - As per Section 2 clause 54 of Companies Act, 2013
A director who, by virtue of the articles of a
company or anagreement with the company or a resolution passed in its general
meeting, or by its Boardof Directors, is entrusted with substantial powers of management
of the affairs of thecompany and includes a director occupying the position of
managing director, by whatevername called.
MD
means a Director. As a MD or WTD must also be a director,
theBoard can appoint to the office of MD/WTD only a person who is already a
director.
Situation: If, for any reason such as
the need of possessing professional or technical qualification, an outsider has
to be appointed, the course to be followed is first to get him appointed as
director either by the Board itself as an additional director under section 161
or by the Company in general meeting u/s 152 for such period as the company may
determine.
Manager:-As per Section 2 clause
53 of Companies Act, 2013
An individual who, subject to the
superintendence, control and directionof the Board of Directors, has the
management of the whole, or substantially the whole,of the affairs of a
company, and includes a director or any other person occupying the position of
a manager, by whatever name called, whether under a contract of service or not.
Whole-Time Director: - As per Section 2 clause 54 of Companies
Act, 2013
A
director in the whole-time employment of the company.In other words, a director
employed to devote the whole of his time and attention in the carrying on of
the affairs of the Company.
Whether a WTD can be
director in other Companies:
That
is to say he cannot also be an employee of another Company or elsewhere, or be
engaged in any other business pursuit, though he may be an ordinary director of
one or more other Companies also.
Executive Director: - Companies (Specification of definitions
details) Rules, 2014, 2(K)Executive Director means a Whole Time Directoras
defined in clause (94) of section 2 of the Act.
PURPOSE OF FILING OF FORMS:
MGT-14: This form required to file within 30
days of passing of resolution and required to file for below mentioned purposes
for All The Companiesincluding
Private Limited Company {Section 117(3)(c)}.
·
Appointment
of Managing Director
·
Re-appointment
of Managing Director
·
Renewal
of Appointment of Managing Director
·
Variation
of the Term of Appointment of Managing Director
MR-1: This form is required to be filed
within 60 days of appointment of Managerial Personnel and required to file for
the Company OTHER THAN Private
Company and Government Company.
DIR-12:- This form is required to be filed within 30 days of passing
of resolution and required to file for the company OTHER THAN Government Company in which the entire paid up share
capital is held by the Central Government, or by any State Government or
Governments or by the Central Government and one or more State Governments
RESOLUTION REQUIREMENT:
For appointment or reappointment of Managerial Personnel
(MD/WTD/Manager) following resolution required to be filed in case of;
PRIVATE COMPANY:
§ In case of appointment of MD/WTD/Manager Private Company
required passing Board Resolution.
§ Board resolution can be passed by Circular Resolution or in the Meeting of Board of Directors.
PUBLIC COMPANY:
§ Passing of Board
Resolution required passing subject to approval
of Shareholders in Next General Meeting.
§ Passing of Ordinary
Resolution required passing in subsequent General
Meeting.
§ Board resolution CAN NOTbepass by Circular Resolution.
Note: Approval of
Central Government in case such appointment is at variance tothe conditions
specified in that Schedule.
MATTER COVERED IN RESOLUTIONOF APPOINTMENT:
§ Terms and conditions of appointment
§ Remuneration
MATTER COVERED IN NOTICE OF APPOINTMENT:Notice of Board Meeting and General Meeting
shall includes;
§ Terms and conditions of appointment
§ Proposed Remuneration
§ Interest of Director & Directors in such appointment if
any.
TENURE OF MANAGERIAL PERSONNEL:
Maximum
tenure for appointment of Managing Director, Whole Time Director or Manager is
5 (Five) Year at a time. {Section 196(2)}.
Re-appointment:
The company may re-appointment them for next termbut not earlier than one year before expiry of the current term. This means, company may
re-appoint them for next term in last one year of current term. Section 196(2)
proviso
AGE FOR APPOINTMENT OFMD/WTD/Manager:
MINIMUM AGE:Minimum age for appointment as MD/ WTD/ Manager is 21
(Twenty) of year. There is an absolute prohibition on appointment of a person
below the age of 21 year.
MAXIMUM AGE:Maximum age for appointment as MD/ WTD/ Manager is 70 (Seventy)
of year. But subject to approval of Shareholders in General Meeting a person
can be appoint as MD/WTD/Manager even after obtaining age of 70 years.
CESSATIONOF CONTINUATION OF APPOINTMENT OFMD/WTD/MANAGER:
A person can’t continue as MD/WTD/Manager who-
·
Is below the age of 21 year or has
attained the age of 70 years
·
is an undischarged insolvent or has at
any time been adjudged as an insolvent
·
has at any time suspended payment to
his creditors or makes, or has at any time made, a composition with them; or
·
has at any time been convicted by a
court of an offence and sentenced for aperiod of more than six months
INFORMATION REQUIRED TO BE PROVIDE BY PERSON TO BE APPOINTED:
Documents Required to be Provide:
·
A declaration that he is not
disqualified to become a director under this Act, 2013 (DIR-8)
·
Consent on or before appointment
(DIR-2)
·
Self attested copy of Residential Proof
·
Self attested copy of PAN
Information Required to be Provide:
Every director is required to disclose the following details
to Company:
i.
Director Identification Number
(optional for key managerial personnel);
ii. present
name and surname in full;
iii. any
former name or surname in full;
iv. father’s
name, mother’s name and spouse’s name(if married) and surnames in full;
v. date
of birth;
vi. residential
address (present as well as permanent);
vii. nationality
(including the nationality of origin, if different);
viii. occupation;
ix. office
of director or key managerial personnel held or relinquished in any other body
corporate;
x. The
details of securities held by them in the company, its holding company,
subsidiaries, subsidiaries of the company’s holding company and associate
companies relating to-
·
the number, description and nominal
value of securities;
·
the date of acquisition and the price
or other consideration paid;
·
date of disposal and price and other
consideration received;
·
cumulative balance and number of
securities held after each transaction;
·
mode of acquisition of securities ;
·
mode of holding – physical or in
dematerialized form; and
·
whether securities have been pledged or
any encumbrance has been created on the securities.
Disclosure of Interest of Directors:
Section-184(1)
Appointment:Every Director shall disclose his
interest in any company or body corporate, firms, or other association of
individuals at the first Board Meeting in which he participates as director and
thereafter at the first Board Meeting in every financial year or whenever there
is any change in the disclosures already made, then at the first Board meeting
held after such change. The details shall include:
- Name of company or companies
or bodies corporate, firms or other association of individuals,
- Nature of interest
- Whether interest is held
directly or through relatives
- Shareholding , if any
- Date of acquisition
Relinquishment:Every director or key
managerial personnel shall, within a period of 30 days of his appointment, or
relinquishment of his office, as the case may be, disclose to the company the
particulars specified in sub-section (1) of section 184 relating to his concern
or interest in the other associations which are required to be included in the
register under that sub-section or such other information relating to himself
as may be prescribed
NOTES:
A.
|
196(1)
|
There
can be only Managing Director or Manager. Both positions can’t be filed at
same time.
|
B.
|
196(3)(d)
|
A person can’t be appointed as
Managerial Personnel if he is convicted by a court of an offence and
sentenced for a period of more than 6 (Six)
month.This phrasing includes conviction of all kinds of
offences
|
C.
|
196(4)
|
Remuneration
should be approved by Board of Director subject to approval of Shareholders
in General meeting in case of public Company.
|
D.
|
Remuneration should be approved by Board
of Director in Private Limited company.
|
|
E.
|
Schedule-V/
Part-I
|
No
person shall be eligible for appointment as a MD or WTD or Manager of company
unless he “[1]IS RESIDENT IN
INDIA”
|
F.
|
A person attained age 70 can be
appoint as Managerial personnel subject to approval of shareholders by
passing of Special Resolution.
|
I.
|
Whether
a person can be appointed as Managing Director in more than one Company.
|
As per 203(3) third proviso, Yes a person can be appoint as MD
even he is already MD/Manager in one other Company and not more than one
subject to condition.
|
|
II.
|
What
is the provision to appoint a person as MD in second Company?
|
Such appointment or employment is made or approved by a
resolution passed at ameeting of the Board with the consent of all the
directors present at the meeting and of whichmeeting, and of the resolution
to be moved thereat, specific notice has been given to all thedirectors then
in India.
|
|
III.
|
What
is the time period for appointment of MD/WTD/Manager If the office of any
whole-time key managerial personnel is vacated.
|
The resultingvacancy shall be filled-up by the Board at a
meeting of the Board within a period of sixmonths from the date of such
vacancy
|
|
IV.
|
Whether
casual vacancy of appointment MD/WTD/Manager can be filed by passing of
Circular Resolution.
|
No, Casual Vacancy can’t be filed by Circular Resolution. It
can be filed only in the Meeting of Board of Directors. Section 203(4)
|
|
V.
|
Whether
MD/WTD/Manager can appoint as Director in any other Company.
|
Yes,
MD/WTD/Manager can appoint as director in other company with the permission
of theBoard of another Company.
|
|
VI.
|
Whether
a Non-Resident can appoint as Managerial Personnel?
|
As per Schedule-V a Managerial personnel should be
resident in India.
|
|
VII.
|
Whether
Schedule V applicable on Private Limited Companies.
|
Schedule V NOT applicable on Private Limited
Company w.e.f. 05.06.2015 because of Exemption notification on Private
Limited Company.
|
|
VIII.
|
Whether
there is any restriction on payment of Remuneration to Managerial Personnel
in case of private limited Company?
|
In
case of private limited Company Section 197 not applicable, therefore there
is no restriction on remuneration to Managerial Personnel.
|
_________________________________________________________________________________
Disclaimer: The entire contents of this document have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation. Although care has been taken to ensure the accuracy, completeness and reliability of the information provided, I assume no responsibility therefore. Users of this information are expected to refer to the relevant existing provisions of applicable Laws. The user of the information agrees that the information is not a professional advice and is subject to change without notice. I assume no responsibility for the consequences of use of such information. IN NO EVENT SHALL I SHALL BE LIABLE FOR ANY DIRECT, INDIRECT, SPECIAL OR INCIDENTAL DAMAGE RESULTING FROM, ARISING OUT OF OR IN CONNECTION WITH THE USE OF THE INFORMATION. This is only a knowledge sharing initiative and author do not intend to solicit any business or profession.
[1]Resident
of India Include a person who has been staying in India for a continuous period
of less than 12 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.
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