Procedure for Appointment of Managing Director (MD)

September 23, 2025
Registrationwala

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Procedure for Appointment of Managing Director (MD)

Procedure for Appointment of Managing Director (MD)

September 23, 2025

Registrationwala

Preface: This post was originally published in 2022 and has been updated on September 23, 2025, to provide you with the most current and accurate information.

In a company, the managing director (MD) is one of the most senior executives. He is responsible for the strategic leadership and daily operations of the company, and reports directly to the CEO or the Board of Directors. In this blog post, we shall discuss the procedure for appointment of an MD.

Who is Managing Director?

The Managing Director definition has been provided under the Companies Act 2013. According to Section 2(54) of the Act, 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.”

Role of Managing Director

In a company, the role of an MD is extremely important. Here are the major roles and responsibilities of an MD:

He is entrusted with the responsibility of monitoring the company’s overall affairs.
He formulates strategies that propel business growth and ensure the day to day operations of the company take place smoothly.
Essentially, an MD acts as a link between the company’s board of directors and the employed individuals.
The MD keeps the board and CEO informed about business strategies, financial goals and latest industry trends.
He designs public relations campaigns, research initiatives and marketing efforts to increase the company’s visibility.
Moreover, he acts as the company’s representative in negotiations with suppliers, partners, clients, vendors and government authorities. This promotes strong partnerships and successful outcomes.

Power of Managing Director

The powers of MD are as follows:

An MD has the power to enter into contracts and agreements on the company’s behalf.
He can make key managerial decisions as well as financial decisions for the company.
He can raise funds required for business operations. He can also invest idle or surplus resources of the company (for the company’s benefit).
He oversees and manages the entire workforce. He can issue directions to departmental heads to ensure the board’s decisions are effectively implemented.
He can convene meetings with the employees and members of the company.
In addition to the powers mentioned above, an MD may have additional powers according to the company’s articles of association.

Rules for Appointment of MD

Seeing the importance and responsibility carried by an MD, the government has laid rules that have to be followed by a company under Section 196 of CA 2013. These rules must be strictly adhered to by companies:

A private limited company has to choose between an MD and manager because appointment of both is not allowed.
Consecutive re-appointment of the same person, by a company, as the MD after his span of 5 years is over, not allowed. Also, appointment of a new person also must not be made until less than one year of the old managing director's tenure is left.
Any person belonging to below mentioned criteria, should not be appointed by any company for the post of MD:

He is either less than twenty-one years or is seventy years old. But, in the case of the seventy year old, appointment is possible through a special resolution passed, justifying the reason for such a decision made.
He is known as a bankrupt who is loaded with unpaid dues of many.
He has at any time suspended payment to his creditors or makes, or has at any time made, a composition with them.
He is facing conviction by the court of law, with a punishment amounting to more than six months.

Adhering to the provisions of section 197 & Schedule V, an MD will be appointed, with the approval of the terms and conditions and the remuneration payable, by the Board of Directors during their meeting. Also, in case the appointment is not adhering to the conditions, approval will be made in the next meeting through a resolution passed jointly by the board of directors and the central government respectively. A notice summoning the board to consider this appointment should include the key terms and conditions.
As per the provisions of this Act, in case of an appointment of MD, that has not been approved by the company during the general meeting, none of his/her act, done before approval, will be declared as invalid.

Procedure for Appointment of Managing Director

The procedure for appointment of MD in a company includes several steps. Below, we have explained each essential step:

First, a board meeting must be held for consideration of appointment of MD. Then, a resolution needs to be passed for appointment.
Now, it’s time to execute an agreement with MD. The agreement must state the terms and conditions of the appointment.
Within 30 days from the date of appointment, the board resolution must be filed using form MGT 14. It is important to note that form MGT 14 is also required in case of variations in terms and conditions for appointment of MD.
Then, the particulars of MD must be filed in form DIR 12 within 30 days from the date of appointment.
Also, Form MR 1 has to be filed for appointment of MD. It must be filed within 60 days from the date of appointment.

Conclusion

A Managing Director (MD) is one of the most senior executives in a company. His role in a company is quite essential for business growth and smooth business operations. Generally, an MD reports directly to the Board of Directors or the CEO. Want to register a company in India? Connect with Registrationwala for assistance in the company registration process.