A managing director of a company is the post of the most senior officer in a private or government organisation. He holds responsibility of executing corporate decisions and manages the administration of the organisation.
Appointment of Managing Director:
Seeing the importance and responsibility carried by a Managing Director, the government has laid rules that have to be followed by a company under Section 196 of CA-2013. The company has to strictly adhere to the rules.
Rules laid by government for appointment of Managing Director as per Section 196, CA-2013:
- It is advisable for a private limited company to choose between a managing director and manager because appointment of both is not allowed.
- Consecutive re-appointment of the same person, by a company, as the managing director after his/her span of 5 years is over, not allowed. Also, appointment of a new person also must not be made until less than one year term 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 managing director:
- He/She 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/She is known as a bankrupt who is loaded with unpaid dues of many.
- He/She has, in the past, rejected payment of his creditors.
- .He/She 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, a managing director 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 a managing director, that has not been approved by the company during the general meeting, none of his/her act, done before approval, will declared as invalid.