The Appointment of Managing director is directed by Section 203 of the Companies Act, 2013 (before Section 269 of the Companies Act, 1956). However, it is not mandatory to appoint a Managing Director in a Private Limited Company under the Companies Act, 2013.
The Board of Directors appoints one of its members to manage the responsibility of the company as a whole-time officer and calls him the Managing Director.
He acts as the chief executive. He occupies a position of dual authority and responsibility. As a manager, he performs the managerial functions and as a director, he attends the Board meetings.
Only that person can be appointed as a Managing Director or Whole-time Director who is already a director in the company. So one cannot Appoint a non-director is a Managing or Whole-time Director.
APPOINTMENT OF MANAGING DIRECTOR, WHOLE–TIME DIRECTOR OR MANAGER:
- A company cannot appoint both the managing director and manager at the same time.
- Managing Director, whole-time director, and manager can be appointed for a maximum of 5-year tenure, however, the company may re-appoint them before the expiry of their present term but not before one year before the expiry of the term. This means a company may re-appoint them for next term in the last year of the current term. [Sub – section (2)]
- At the time of appointment for these positions, the minimum age is Twenty-one years and retirement are is seventy years. so person below age twenty-one can be appointed as Managerial Personnel.
Procedure for appointment of a person who has attained an age of 70 years:
- Call a Board Meeting
- Issue notice of General Meeting
- Pass Special Resolution In General Meeting.
- File MGT-14 with ROC within 30 days of the passing of the Resolution.
- File form DIR-12 and MR-1 with ROC within 30 days of the passing of the resolution of appointment.
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The Managing Director must fulfill the following criteria:
- He must be a member of the Board of directors.
- He must be authorized with significant powers of management, which would not otherwise be exercisable by him.
- The general powers to do administrative acts of a routine nature are not to be deemed to be the substantial powers of management.
- The powers of management given to a managing director must be exercised by him subject to the control, superintendence, and directions of the Board of Directors.
- who takes up the position of the managing director even without being designated as such would also be deemed to be a managing director.
Persons not to be appointed Managing Directors:
No company should appoint or employ, or continue the appointment, any person as to its managing or whole-time director who-
- is an undischarged bankrupt, or has at any time been adjudged a bankrupt,
- suspends or has at any time suspended, payment to his creditors, or has at any time made a composition with them
- is, or has at any time, convicted by a Court of an offense involving moral turpitude.
Powers, duties, and responsibilities of the managing director
- Being a member of the board of directors participates in policy-making functions and formulating the objectives of the Board.
- Execute policies laid down by the Board of Directors.
- Act as the intermediary officer between the organization and the Board of Directors.
- Communicate and Interpret the policies of the company to sub employees.
- To review and present the operations of the company to the Board periodically accounts and statistics showing the progress and the present position of the company.
- Appoint high officials of the company.
- Formulate the compensation and employment plan by the accepted policies of the company.
- Plan the expansion and development of the business.
- Organize meetings with department heads.
- Promote high morale among the employees of the company by creating a sense of belonging.
- Maintain contact with the govt., trade unions, and community,chamber of commerce, at large.
- Maintain a balanced relationship between line and staff managers.
- Approve or disapprove development plans submitted by the senior executives and place before the Board for final approval.
- Build a system of budgetary control by which the actual performance of the company may be evaluated against the planned course of action.
- Supervise production and sales activities of the company.
- Give due attention to consumer satisfaction which is ensured by the continued supply of goods and services to the market.
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