{"id":15993,"date":"2021-04-26T17:23:41","date_gmt":"2021-04-26T11:53:41","guid":{"rendered":"https:\/\/www.cagmc.com\/?p=15993"},"modified":"2024-06-04T12:50:27","modified_gmt":"2024-06-04T07:20:27","slug":"appointment-of-managing-director","status":"publish","type":"post","link":"https:\/\/www.cagmc.com\/blog\/appointment-of-managing-director\/","title":{"rendered":"Appointment of Managing Director"},"content":{"rendered":"<p id=\"intro\" style=\"text-align: justify;\">The Managing Director of a company is the most important working director, and is in charge of the way the company is managed. They are responsible for the daily operations of a company, organization, or corporate division. Managing directors have the highest rank within the company and have the authority to fire the executive director. If the company lacks a managing director or CEO, the executive director takes the spot as the highest ranking company official.<\/p>\n<table style=\"width: 100%;\">\n<tbody>\n<tr>\n<td style=\"padding: 10px; border: 1px solid #d2d2d2;\"><strong>Table of Content<\/strong><\/p>\n<ul type=\"1\">\n<li><a href=\"#intro\">Introduction<\/a><\/li>\n<li><a href=\"#definition\">Definition of Managing Director according to Companies Act, 2013 [Section 2(54)] <\/a><\/li>\n<li><a href=\"#important\">Important Pre-Requisites for appointment of Director as managing director under Companies Act, 2013<br \/>\n<\/a><\/li>\n<li><a href=\"#maximum\">Maximum tenure of Managing Director in a Company <\/a><\/li>\n<li><a href=\"#disqualification\">Disqualification employment of any person as managing director <\/a><\/li>\n<li><a href=\"#procedure\"> Procedure for appointment of director as managing director<\/a><\/li>\n<\/ul>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<h2 id=\"definition\" style=\"text-align: justify;\"><b>Definition of Managing Director according to Companies Act, 2013 [Section 2(54)]<\/b><\/h2>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">The Companies Act, 2013 has for the first time recognized the concept of Key Managerial Personnel. As per Section 2(51) \u201ckey managerial personnel\u201d, in relation to a company, means<\/span><\/p>\n<ol style=\"text-align: justify;\">\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The Chief Executive Officer or the managing director or the manager<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The Company Secretary<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The whole-time director<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The Chief Financial Officer<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Such other officer, not more than one level below the directors who is in whole-time employment, designated as key managerial personnel by the Board; and<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Such other officer as may be prescribed<\/span><\/li>\n<\/ol>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">Managing Director means a <\/span><b>director who is entrusted with substantial power of management.<\/b><\/p>\n<p><img fetchpriority=\"high\" decoding=\"async\" class=\"alignnone wp-image-16001 size-full\" src=\"https:\/\/www.cagmc.com\/blog\/wp-content\/uploads\/2021\/04\/appointment-of-managing-director-cagmc.png\" alt=\"\" width=\"1200\" height=\"630\" srcset=\"https:\/\/www.cagmc.com\/blog\/wp-content\/uploads\/2021\/04\/appointment-of-managing-director-cagmc.png 1200w, https:\/\/www.cagmc.com\/blog\/wp-content\/uploads\/2021\/04\/appointment-of-managing-director-cagmc-300x158.png 300w, https:\/\/www.cagmc.com\/blog\/wp-content\/uploads\/2021\/04\/appointment-of-managing-director-cagmc-1024x538.png 1024w, https:\/\/www.cagmc.com\/blog\/wp-content\/uploads\/2021\/04\/appointment-of-managing-director-cagmc-768x403.png 768w, https:\/\/www.cagmc.com\/blog\/wp-content\/uploads\/2021\/04\/appointment-of-managing-director-cagmc-615x323.png 615w, https:\/\/www.cagmc.com\/blog\/wp-content\/uploads\/2021\/04\/appointment-of-managing-director-cagmc-400x210.png 400w, https:\/\/www.cagmc.com\/blog\/wp-content\/uploads\/2021\/04\/appointment-of-managing-director-cagmc-292x153.png 292w\" sizes=\"(max-width: 1200px) 100vw, 1200px\" \/><\/p>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">The substantial powers of management can be entrusted to a managing director of a company in any of the following four ways (i.e. there are four modes of appointment of managing director)<\/span><\/p>\n<p style=\"text-align: justify;\"><img decoding=\"async\" class=\"aligncenter wp-image-15994 size-full\" src=\"https:\/\/www.cagmc.com\/blog\/wp-content\/uploads\/2021\/04\/Screenshot-2021-04-24-at-10.05.30-AM.png\" alt=\"managing director of a company in four way\" width=\"667\" height=\"384\" srcset=\"https:\/\/www.cagmc.com\/blog\/wp-content\/uploads\/2021\/04\/Screenshot-2021-04-24-at-10.05.30-AM.png 667w, https:\/\/www.cagmc.com\/blog\/wp-content\/uploads\/2021\/04\/Screenshot-2021-04-24-at-10.05.30-AM-300x173.png 300w, https:\/\/www.cagmc.com\/blog\/wp-content\/uploads\/2021\/04\/Screenshot-2021-04-24-at-10.05.30-AM-615x354.png 615w, https:\/\/www.cagmc.com\/blog\/wp-content\/uploads\/2021\/04\/Screenshot-2021-04-24-at-10.05.30-AM-400x230.png 400w, https:\/\/www.cagmc.com\/blog\/wp-content\/uploads\/2021\/04\/Screenshot-2021-04-24-at-10.05.30-AM-292x168.png 292w\" sizes=\"(max-width: 667px) 100vw, 667px\" \/><\/p>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">The administrative acts of a routine nature such as a affixing common seal (if any), draw and endorse any cheque or negotiable instruments, signing share certificates, etc are excluded from the sphere of substantial powers to be exercised by the managing director.<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">Further, the expression Managing Director shall also include a director occupying the position of managing director, by whatever name called.<\/span><\/p>\n<ol style=\"text-align: justify;\">\n<li><span style=\"font-weight: 400;\"> President<\/span><\/li>\n<li><span style=\"font-weight: 400;\"> Chief Executive Officer,<\/span><\/li>\n<li><span style=\"font-weight: 400;\"> Chief Operating Officer, etc<\/span><\/li>\n<\/ol>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">In the case of multinational companies shall be considered as the managing director for the purpose of Companies Act, although they are not designed as such.<\/span><\/p>\n<h2 id=\"important\" style=\"text-align: justify;\"><b>Important Pre-Requisites for Appointment of Director as Managing Director under Companies Act, 2013<\/b><\/h2>\n<ol style=\"text-align: justify;\">\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">As per above definition, a person has to be a director before he can be appointed managing director. Therefore, if a company wants to appoint a person as managing director who is not a director of the company, he has first to be appointed as an additional director in accordance with the provision of Section 161 of the Act.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Managing Director is vested with the substantial power of management, but he need not necessarily have the whole or substantially the whole of the affairs of a company under his management. A company may, therefore, have more than one managing director.<\/span><\/li>\n<\/ol>\n<h2 style=\"text-align: justify;\"><b>Maximum Tenure of Managing Director in a Company<\/b><\/h2>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">No company shall appoint or re-appoint any person as its managing director for a term exceeding <\/span><b>five years<\/b><span style=\"font-weight: 400;\"> at a time.<\/span><\/p>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">Provided that no re-appointment shall be made earlier than one year before the expiry of his term.<\/span><\/p>\n<p style=\"text-align: justify;\"><b>Note: No Company shall appoint or employ at the same time a managing director and a manager.<\/b><\/p>\n<h2 id=\"disqualification\" style=\"text-align: justify;\"><b>Disqualification employment of any person as managing director<\/b><\/h2>\n<p style=\"text-align: justify;\"><span style=\"font-weight: 400;\">No person can be appointed as a managing director, who <\/span><span style=\"font-weight: 400;\">Is below the age of twenty-one years or has attained the age of seventy years.<\/span><\/p>\n<p style=\"text-align: justify;\"><b>Provided<\/b><span style=\"font-weight: 400;\"> that appointment of a person who has attained the age of seventy years may be made by the passing of special resolution in which case the explanatory statement annexed to the notice for such motion shall indicate the justification for appointing such person;<\/span><\/p>\n<ul>\n<li style=\"text-align: justify;\"><span style=\"font-weight: 400;\">Is an undischarged insolvent or has at any time been adjudged as an insolvent;<\/span><\/li>\n<li style=\"text-align: justify;\"><span style=\"font-weight: 400;\">Has at any time suspended payment to his creditors or makes, or has at any time made, a composition with them; or<\/span><\/li>\n<li style=\"text-align: justify;\"><span style=\"font-weight: 400;\">Has at any time been convicted by a court of an offence and sentenced for a period of more than six months.<\/span><\/li>\n<\/ul>\n<h2 id=\"procedure\" style=\"text-align: justify;\"><b>Procedure for appointment of Director as Managing Director<\/b><\/h2>\n<p style=\"text-align: justify;\"><img decoding=\"async\" class=\"alignnone wp-image-15996 size-full\" src=\"https:\/\/www.cagmc.com\/blog\/wp-content\/uploads\/2021\/04\/cagmc-appointment-of-directors-e1619435468972.png\" alt=\"Procedure for appointment of Director as Managing Director\" width=\"800\" height=\"1516\" srcset=\"https:\/\/www.cagmc.com\/blog\/wp-content\/uploads\/2021\/04\/cagmc-appointment-of-directors-e1619435468972.png 800w, https:\/\/www.cagmc.com\/blog\/wp-content\/uploads\/2021\/04\/cagmc-appointment-of-directors-e1619435468972-158x300.png 158w, https:\/\/www.cagmc.com\/blog\/wp-content\/uploads\/2021\/04\/cagmc-appointment-of-directors-e1619435468972-540x1024.png 540w, https:\/\/www.cagmc.com\/blog\/wp-content\/uploads\/2021\/04\/cagmc-appointment-of-directors-e1619435468972-768x1455.png 768w, https:\/\/www.cagmc.com\/blog\/wp-content\/uploads\/2021\/04\/cagmc-appointment-of-directors-e1619435468972-615x1165.png 615w, https:\/\/www.cagmc.com\/blog\/wp-content\/uploads\/2021\/04\/cagmc-appointment-of-directors-e1619435468972-400x758.png 400w, https:\/\/www.cagmc.com\/blog\/wp-content\/uploads\/2021\/04\/cagmc-appointment-of-directors-e1619435468972-292x553.png 292w\" sizes=\"(max-width: 800px) 100vw, 800px\" \/><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The Managing Director of a company is the most important working director, and is in charge of the way the [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":15366,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","theme-transparent-header-meta":"default","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"set","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"var(--ast-global-color-4)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[70],"tags":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v24.4 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Appointment of Managing Director - Goyal Mangal &amp; 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