The Appointment of Managing director is directed by the Section 203 of the Companies Act, 2013 (prior 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 he is already a director in the company. So one cannot Appoint a non-director as 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 prior than one year before the expiry of the term. This means a company may re-appoint them for next term in the last one year of the current term. [Sub – section (2)]
- At the time of appointment for these positions, the minimum age is Twenty-one year 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 Resolution.
- File form DIR-12 and MR-1 with ROC within 30 days of the passing of the resolution of appointment.
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 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 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 in accordance with the accepted policies of the company.
- Plan the expansion and development of the business.
- Organise 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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