MANAGING DIRECTOR

A brief explanation on Managing director.

1. MANAGING DIRECTORMANAGING DIRECTOR

2. Managing Director:Managing Director:
Managing Director means a director who :
a.By virtue of an agreement with the company or
b.By resolution passed by the company
c.By Resolution passed by its Board of Directors
d.By virtue of its MOA or AOA
Is entrusted with the substantial powers of management which would not
otherwise exercisable by him, and includes a director occupying the position
of managing director , by whatever name called.
Provided further that a managing director of a company shall exercise his power
subject to control & directions of its Board of Directors.
Whole Time Director:Whole Time Director:
Whole time director is not defined by the companies act.
As per section 269,”Whole time director includes a director in whole time
employment of a company.
The Department of Company Affairs Clarified that an whole time employee
appointed as a director will be a whole time director only if substantial
powers of management is vested with him.

3. Manager :Manager :
Manager means an individual who subject to the control & direction of board Manager means an individual who subject to the control & direction of board
of directors has the management of the whole or substantlly the whole of of directors has the management of the whole or substantlly the whole of
the affairs of the company and includes the director or the any other the affairs of the company and includes the director or the any other
person occupying the position of manager, by whatever name calledperson occupying the position of manager, by whatever name called
and whether under a contract of service or not.and whether under a contract of service or not.
A manager may or may not be a director of a company.A manager may or may not be a director of a company.
Company cannot have simultaneously two managers .Company cannot have simultaneously two managers .
A company cannot at a same time employ a managing Director and a A company cannot at a same time employ a managing Director and a
manager. manager.
However a company can simultaneously a manager and a whole time director However a company can simultaneously a manager and a whole time director
..
Only an individual can be appointed as a manager. Only an individual can be appointed as a manager.
No firm or body corporate can be appointed as a manager.No firm or body corporate can be appointed as a manager.

4. Can a person be employed as a Managing Can a person be employed as a Managing
Director in more than one company?Director in more than one company?
Section: 316 – No
However, More than one company (Board
resolution – all directors present must vote
in favour – all directors resident in India
must be served special notice
More than two companies – Central Govt.
may pass order accordingly
No limit on no. of private companies, which
is not a subsidiary of a public limited
company.

5. Reappointment of Managing Reappointment of Managing
DirectorDirector
Section: 269
Must be taken into consideration before
the expiry of his term
Reappointment must be approved by the
Board, any irregularities, Central Govt.
approval is required
Reappointment procedure is the same as
appointment

6. Retirement by rotation of M.D. Retirement by rotation of M.D.
M.D. shall not be liable to retire by
rotation, unless stated in the A/A*
Any change in this matter in the A/A
requires C.G. approval (No approval is
required for new provisions i.e., only for
altering the existing provisions
Not applicable for Govt. Companies
Retires by rotation in the AGM and
reappointed in the same AGM – No Break –
No approval from C.G. is required

7. Whether a person initially appointed as Whether a person initially appointed as
additional/alternate director could continue additional/alternate director could continue
as M.D.?as M.D.?
Alternate / Additional Directors have no
locus standi
However, if he is elected as director in the
AGM, he will automatically continue to act as
M.D. for the full term, approved by the C.G.
However, one ceases to be director on
account of return of the director, he will
case to be M.D. also.

8. Resignation & Removal of M.D.Resignation & Removal of M.D.
Resignation of the Managing Director
becomes effective only if it is accepted by
the Board
A M.D. can resign and continue as an
ordinary director
No C.G. permission is required
Removal as per the provisions of A/A or
terms of contract
Removal of Director as per Sec.284
automatically removes M.D.
However, compensation payable as per the
terms of the contract

9. Qualifications of M.D.Qualifications of M.D.
Section 274 + Section 267:
A. Undischarged insolvent or at any time
adjudged as insolvent
B. Suspended payment to creditors
C. Convicted for offences involving moral
turpitude

10. Conditions to be satisfied for appointment Conditions to be satisfied for appointment
without the approval of C.G. {Schedule-xiii}without the approval of C.G. {Schedule-xiii}
1.Not sentenced to imprisonment for any
period or fined more than Rs.1,000/-
2.Not detained for any period for smuggling
3.Age >25 years and < 70 years {Deviation –
Spl. Resolution to be passed}
4.M. D. in more than one company
5.Resident in India (Atleast 12 months before
the date of appointment – for employment
or carrying on business) – Not applicable
to SEZ with proper employment visa

11. Powers of M.D.Powers of M.D.
Powers subject to superintendence,
direction and control of the Board &
provisions of the companies Act
Generally, A/A will contain the powers
All powers expect to be specifically done
by the board as per the A/A or the Act
Contract of appointment may also contain
the powers
Representative capacity of M.D. [Even
though no power of attorney]

12. Relationship with the BoardRelationship with the Board
M.D. is the link between the Board and
the executives
He reviews the working of the company
at the board meetings
Decisions – Expert advice of the M.D. +
knowledge, experience & expertise of the
Board

13. Position of M.D. on private Position of M.D. on private
company becoming publiccompany becoming public
The appointment made prior to the private
company becoming a public company,
voluntary shall remain unaffected for a
period for which the appointment was made
or 5 years from the date the company
becoming a public limited company,
whichever is less
When the office of director is terminated,
automatically the office of M.D. is
terminated

14. Duties of M.D.Duties of M.D.
Set out either
a. Contract of employment
b.A/A
c.Board resolution or Company resolution
According to the company law, he is fully
answerable to the Board
Board cannot delegate all its powers to the
M.D.

15. LiabilitiesLiabilities
Liable for breach – Willful or unintentional
Liable for fraud
Liable for misappropriation of funds
Liable for misstatement in the prospectus
“Officer in Default”