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MANAGING DIRECTOR

khushboo (CS) (234 Points)

09 September 2009

DOES PRIOR APPROVAL OF SHAREHOLDERS REQUIRED TO APPOINT MD.

OR IS THERE IS ANY TIME LIMIT FOR SHAREHOLDERS APPROVAL FOR APPOINTMENT OF MD APPOINTED IN BOARD MEETING.

PLZ ALSO INFORM ABOUT THE FORMS REQUIRED TO FILE TO ROC

(ASSUME FOR A PUBLIC COMPANY IN WHICH DIRECTOR GOING TO BE APPOINTED AS MD)

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5 Replies

Ajay Mishra (Company Secretary) (74337 Points)
Replied 09 September 2009

Dear Ms. Khushboo

PROCEDURE FOR APPOINTMENT OF MANAGING DIRECTOR

Aboard Meeting shall be convened to decide on the proposal to appoint a particular person as a managing director and also decide provisionally the terms and conditions of the appointment including the remuneration if any, payable to the managing director.
The Board decide whether the remuneration payable to MD would be by way of monthly payment or at a specified percentage of the net profit of the company or partly by the one way or partly by the other.
A copy of the Board Resolution regarding the appointment should be filed with the ROC in Form-23 within 30 days from the date of passing of such resolution.{ Section 192(1) read with Section 195(4)(c)}.
If the appointment is in conformity with the provision of Schedule XIII, a return in Form-25 C must be filed with in 90 days from the appointment with ROC.
If the appointment is not in conformity with the procedures of Schedule XIII, approval of the Central Government is required, in the following manner:

before any application is made by the company to CG, there shall be issued by or on behalf of the company a general notice to all members indicating the nature of the application proposed to be made.
The notice is to be published at least once in a regional language newspaper and once in an English newspaper circulating in the district where the registered office of the company is situated. {Section 640B}.
An application shall be made to CG in Form-25A within 90 days from the date of appointment, together with the fee as per Companies (Fee on Applications) Rules, 1999.
A copy of the application along with all document (except fees) shall also be forwarded to the ROC.
In case the appointment is made without remuneration, CG approval’s will still be necessary if the appointment falls outside the provisions of Part I of Schedule XIII.

The appointment and remuneration payable to MD require approval of the Shareholders by Ordinary Resolution.{Clause I of Part III of Schedule XIII}.
The terms and conditions of the appointment of MD should be incorporated in an agreement executed by him with the company.
An abstract of the terms of agreement for the appointment of the MD should be sent to every member of the company within 21 days of entering into agreement.

Regards

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Ajay Mishra (Company Secretary) (74337 Points)
Replied 09 September 2009

Dear Ms. Khushboo,

Approval of company in general meeting referred to in paragraph 1 of Part III of Schedule XIII for the appointment of and the remuneration payable to company managerial personal need not be the prior approval of the company (i.e. the company resolution regarding approval need not be passed prior to the appointment of the managerial person) or the approval within 90 days from the date of the appointment. He/She may be initially be appointed by resolution passed by the Board subject to the approval of the company in general meeting and such approval may be obtained in the first general meeting of the company held immediately after his/her appointment and fixation of remuneration by the Board. {Circular No. 2/94 dated 10^th February, 1994}.

Regards

Sneha (Company Secretary) (1594 Points)
Replied 02 May 2011

What are the resolution to be passed or form to be filed with ROC before and after making application to CG in Form 25 A ?

Regards

SANTOSH SHAH (Company Secretary) (754 Points)
Replied 02 May 2011

Originally posted by : Sneha Binani
	What are the resolution to be passed or form to be filed with ROC before and after making application to CG in Form 25 A ? Regards

Hi Sneha

In my view

(if Terms of Agreement as per Schedule XIII)

1. Conduct BM -Board Resolution for appointment of MD

2. Form 23 filing with ROC within 30 Days

3. Form 25-C filing with ROC within 90 days of appointment.

(if Terms of Agreement NOT as per Schedule XIII)

1. Conduct BM-for appointment of Person as MD with Terms

2. Call of EGM, and get approval from Shareholders on the same

3. File Form 23 with ROC within 30 Days

4. File Form 25-A with ROC within 90 days of appointment.

Other views solicited.

regards

Santosh Shah

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N.R.Ranganathan (director) (25 Points)
Replied 12 September 2013

Dear sir,

A circular is quoted above ( 2/94 of 10th Feb, 1994) to the effect that there is no time limit within which the Company has to get the shareholders' approval for the remuneration package to be paid to MD/WTD, which is approved by the Remuneration committee and the Board. For instance, if the package is approved by the Board on 1/1/13, taking effect from the same day, can it be approved at the next general meeting which is AGM to be held on 30/9/13. Or is it necessary to have an EGM for this purpose only. Such a requirement would put the company to lot of expenditure by way of postage, printing, hiring of hall etc. Thanks in advance for your esteemed opinion.

N.R.Ranganathan.