CS Divesh Goyal
Procedure & Requirement Of Appointment Of Managing Director (MD) For Private Limited Company
Appointment of Managing Director, Whole- Time Director OR Manager (Section: 196):
This Section is applicable on Both Private as well as Public companies. Only this section of Chapter-XIII applicable on Private Companies. At the time of practical working on this section, some points create difficulties, because for appointment of Managerial Personnel company have to comply with provisions of Section- 196 and have to leave all other sections of this chapter.
MY OPINION: As per Law, there is no compulsion for private company to appoint MD, WTD and Manager. As per Act Private Company can be in continue working without MD, WTD and manager throughout the life of company.
But problems arise when Private company appoint any Managerial Personnel willingly. Then company requires following Section: 196 of CA-2013.
APPOINTMENT OF MANAGERIAL PERSONNEL:-
For appointment of Managerial Personnel in private company we have to do following things:
PROCEDURE FOR APPOINTMENT OF MANAGERIAL PERSONNEL IF COMPANY HAS ADEQUATE PROFIT:
a. Issue Notice for Calling Board Meeting. Notice shall include:
b. Documents Require from Appointee:
c. Pass Resolution in Meeting for appointment of Managerial Personnel.
d. File Form MGT-14 within 30 days of passing of resolution. (Secion-179)
e. File Form DIR-12 within 30 days of passing of resolution.
f. File Form MR-1 within 60 days of passing of resolution. (Section-196).
g. GM; which will help after this appointment, Take Approval of Shareholders by passing of resolution.
DRAFT FORMATS ATTACHED BELOW:
Ans. Yes – it is mandatory for a company to file a return of appointment of a managing director, whole time director or manager, chief executive officer, company secretary and Chief Financial officer in Form no. MR.1 as prescribed in Rule 3 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. Further, particulars of appointment of Managerial Personnel and any change among them are also required to be filed in Form DIR-12.
Ans: As per third proviso to section 203 of the COMPANIES ACT, 2013 a company may appoint or employ a person as its MD, if he is the MD or Manager of one and not more than one other company with the consent of all directors present at meeting.
Ans. No, the provision of Seciton-197 will not applicable on private companies. For appointment of managerial personnel private company require to follow section-196, but there is no need to follow section-197 for remuneration to managerial personnel.
4. Will Managerial personnel appointed under section 196, treated as KMP?
Ans. No, Managerial Personnel will not be treated as KMP.
Section: 203 talks about KMP and this section not applicable on Private Companies. So if a private company appoints any managerial personnel there Is no need to follow provisions of section-203.
5. If any existing director is interested director in pursuance to appointment of Managerial Personnel, so can he participate in this resolution?
Ans: No, Existing Director can’t participate in this resolution, As per Section-184 of Companies Act, 2013. Such interested director have to disclose before the meeting his interest.
CONCLUSION: As per Companies Act-2013 there is no compulsion to appoint MD/WTD/MANAGER. But some companies Appoint MD/WTD/MANAGER. So Private companies can appoint MD/WTD/ Manager as per process given above. In Companies Act-2013 process is lengthy but it’s not as difficult. It’s just require assistance of Professionals like Company Secretary or Charted Accountant. Because there is heavy penalty under Companies Act-2013. So its my request from all professionals and businessman be careful while working under companies Act-2013.
(Author – CS Divesh Goyal, ACS is a Company Secretary in Practice from Delhi and can be contacted at firstname.lastname@example.org)