A person who is MD / Manager of one public company can be appointed as MD / Manager of another company only with unanimous resolution at Board meeting.. This resolution cannot be passed in committee meeting.
24 September 2009
Agree with Ankur sir, the defination itself states various modes of appoinment of MD , however permission has to be obtained from CG or one must follow S-XIII
25 September 2009
Ankur, I agree with you, the definition of Managing Director is clear enough that the board has the power to appoint MD. But since there is a sepate section (section 269) which is relevant for appointment, i did n't get any support from that section about this, that's caused my doubt. Your comment please.
26 September 2009
APPOINTMENT OF MANAGING DIRECTOR, WHOLE-TIME DIRECTOR & MANAGER WITHOUT APPROVAL OF THE CENTRAL GOVERNMENT
Appointment of managing director in case of private limited companies
The appointment of managing or whole-time director or manager is not mandatory in the case of independent private companies. However, an independent private company can appoint them in accordance with the provisions contained in the Articles of Association.
If Articles of the concerned independent private company do not provide for such office then the Articles will have to be first altered by following the procedure laid down u/s 31 of the Companies Act, 1956.
26 September 2009
APPOINTMENT OF MANAGING DIRECTOR OR WHOLE-TIME DIRECTOR OR MANAGER WITH THE APPROVAL OF THE CENTRAL GOVERNMENT A public company or a private company which is a subsidiary of a public company shall obtain the approval of the Central Government in order to appoint a managing director or whole-time director or manager when the said company is not complying with the requirements of Schedule XIII of the Act.
Time limit for making an application to the Central Government for its approval Every application seeking approval to the appointment of a managing director or whole-time director or manager shall be made to the Central Government within a period of ninety days from the date of such appointment. The application shall be made in e-Form 25A electronically as prescribed in the Companies (Central Government's) General Rules and Forms, 1956.
Procedure to be followed for making an application before the Central Government (a) Publish a general notice to the members of the company indicating the nature of the application proposed to be made and that any person having any objection to the proposal should, if he desires, communicate his objection in writing duly substantiated to the Secretary, Ministry of Company Affairs, New Delhi, within 30 days of the publication of the notice. Such notice shall be published at least once in a newspaper in the principal language of the district in which the registered office of the company is situate and circulating in that district and at least once in English in an English newspaper circulating in that district. [Section 640B(2)] (b) Application in the e-Form 25A shall be made electronically to the Ministry of Company Affairs, Shashtri Bhawan, New Delhi with fees as per Companies (Fees on Application) Rules, 1999. The following documents shall be enclosed to Form 25A:— (i) Certified true copy of Memorandum and Articles of Association; (ii) Certified true copies of the annual accounts together with directors' and auditor's report for the latest 5 financial years; (iii) Certified copies of the resolutions of Board/General meeting including resolution under section 316(2), where applicable;
(iv) Certified true copies of newspaper clippings of notices published under section 640B in original. (c) Copy of application together with all enclosures shall be simultaneously forwarded to Registrar of Companies pursuant to rule 20A(i) of the Companies (Central Government's) General Rules and Forms, 1956.
Central Government may reject application submitted for approval The Central Government may not accord its approval to an application made under section 269(3), if it is satisfied that— (a) the managing or whole-time director or the manager appointed is, in its opinion, not a fit and proper person to be appointed as such or such appointment is not in the public interest; or (b) the terms and conditions of the appointment of managing or whole-time director or the manager are not fair and reasonable. The Central Government can also accord approval to the appointment of a managing director or whole-time director or manager which is not as per Schedule XIII of the Act, for a period lesser than the period for which the appointment is proposed to be made. [Section 269(5)]
Consequences in case if the appointment is not approved by the Central Government If the appointment of a person as a managing or whole-time director or a manager is not approved by the Central Government under section 269(4), the person so appointed shall vacate his office as managing or whole-time director or manager, on the date on which the decision of the Central Government is communicated to the company.
In case of omission or failure to do as above, the appointee shall be punishable with fine which may extend to five thousand rupees for every day during which he omits or fails to vacate such office.
Action to be taken after receipt of Central Government approval A Board meeting is to be called to consider the approval of the Central Government in case the terms approved by the Government are different from those mentioned in the application and take suitable action. In the case falling under sub-paragraph (A), (B), (C) of paragraph I of Section II the appointments will become effective only after receipt of approval of the Central Government.
The Company will arrange to file the particulars of the appointment with the Registrar in an e-Form 23 electronically within 30 days of the appointment as soon as it was made and again after receipt of Central Government approval in case there is any variation and will also forward extracts of the terms and conditions to the members under section 302 within 21 days of the receipt of Government approval on the appointment.
07 October 2009
Ankur, Our Company is a public Limited Company, the managing director will be reappointed.He is fulfilling all the parts of schedule XIII. He will be retiring on 24th Nov, 2009 hence, CG's approval is not required. In this seanario, how we will proceed his appointment. My question is can we simply proceed his appointment by calling a board meeting. In your recent article you have mentioned a director is only be appointed as a MD. Then how the board will exercise it's power or we should move only throgh a general meeting? I am really not yet clear, how we move? Pls. help.
07 October 2009
Further i have a doubt a managing director before his appointment must be a director. Now for the retiring managing director if chosen for reappointment can the board exercise this power? So far as my knowledge the board has the power to fill the casual vacancy, Can the reappointment after completion of the full term of MD be treated as casual vacancy?
07 October 2009
First understand completion of tenure as MD is not equal to vacation of office as director. Only his designation will change after completion of tenure as MD. Now the person would be treated as Director only.
Pass a board resolution before 24th November for re-appointment as MD u/s 317. However if schedule XIII is not applicable then there is no need to take shareholders’ approval otherwise pass board resolution subject to the approval of shareholders approval in the general meeting.
If it is not difficult for you to hold general meting then you may directly pass GM resolution.
07 October 2009
Managing Director may be appointed / reappointed in the Board or General Meeting. In both cases following formalities must be complied with
1. File form no. 23 within 30 days.
2. File form no. 25C within 90 days of appointment.
Appointment or re-appointment of MD/WTD can not be made retrospectively. However remuneration to managerial personnel can be paid retrospectively.
08 October 2009
thanks, Ankur for your help. Finally the last question for you, At what meeting the appointment will be completed? the board approving the appointment passing a resolution or after the approval by members of the board resolution in general meeting? Say, what happen if the resolution is passed by the board before 24th Nov 09 but approval in general meeting will be held after 24th Nov, will it be ok? If "yes", the appointment will n't be retrospective? Remember in our case Schedule XIII is applicable.
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