Shihab Mecheri,LL.B,MBA,MBL (Corporate Lawyer ) (245 Points)
26 August 2011My client is managing director in 2 Public limited companies;now he is joining as the MD in our proposed PVT LTD CO.In such case CG approval needed or not?
Rakesh Dhanuka
(Company Secretary)
(478 Points)
Replied 26 August 2011
Refer sec. 316 of the companies act, 1956, CG approval is needed.
G.L.Subhramanian
(PCS)
(206 Points)
Replied 26 August 2011
Section 316 says that a person can be a Managing Director in any number of Private Limited Companies. But if he wants to be appointed as a Managing Director in a Public Company, he can be a Managing Director in only one other Company which may be Public or Private.
Your case:
Your client can be appointed as Managing Director in your proposed Private Limited Company. He can also be appointed as a Managing Director in any number of Private Companies. Central Government approval is not required in your case.
Central Government approval is required when the susbstance of the section (if he wants to be appointed as a Managing Director in a Public Company, he can be a Managing Director in only one other Company which may be Public or Private.) is exceeded. The Central Government will approve only if it considers it fit for companies to function as a single unit and there should be a common Managing Director to run the companies.
Note:
In case your client wants to be appointed as Managing Director in any other Public Limited Company in future, he should resign as Managing Director from such number of Companies that he should continue as the Managing Director of only one other Company which may be Public or Private.
Regards,
Subbu
CAclubindia
