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md of company

karan vij (64 Points)

23 June 2018

is there any cooling period for reappointment of md of company

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5 Replies

Rahul Singh (cs) (308 Points)
Replied 23 June 2018

no cooling period as such, but no re-appointment shall be made earlier than one year before the expiry of the term.

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karan vij (64 Points)
Replied 23 June 2018

what is the logic of 1year and explain it with an example

Rahul Singh (cs) (308 Points)
Replied 23 June 2018

read section 196 co co. act 2013

Sudipta Chatterjee (9 Points)
Replied 23 June 2018

MD enjoys the highest position in the BOD. He is entrusted with all the major responsibilities for the smooth running of the business. Hence the law wants the shareholders to watch and analyse the performance of the MD for the four years and then to take a judicious decision whether to reappoint him again or not. The provisions of sec 196 protects the shareholders from taking any hasty decision regarding reappointment. In other words even the Md is prohibited to manipulate with the decisions of shareholders by showing good performance in the initial years and securing a reappointment for himself well before the end of his tenure.

Disclaimer: This explanation is my own logical thinking and has not been taken from any secondary source.