How can a Managing Director be appointed in multiple companies as per Companies Act 2013?

Learn about appointing a Managing Director in multiple companies as per the Companies Act 2013. Understand the legal provisions, exceptions, and procedural requirements.

In India, the Companies Act, 2013 (the Act) provides detailed provisions for the appointment of a Managing Director in a company. One important aspect of these provisions is the appointment of a Managing Director in more than one company. In this article, we will discuss the legal provisions and requirements for such an appointment.

1. Legal Provisions

Section 203 of the Companies Act 2013 deals with the appointment of a Managing Director in a company. The section requires every listed company to have a Managing Director, and every other company having a paid-up share capital of Rs.10 crore or more to appoint a whole-time director. In both cases, the appointment of a Managing Director or whole-time director, as the case may be, is subject to the approval of the Members of the Company by Ordinary Resolution passed at the General Meeting of the Company.

Furthermore, Section 203 of the Companies Act, 2013 prohibits the appointment of whole-time key managerial personnel to hold office in more than one Company at the same time.

However, there are 2 exceptions to this rule which allows a whole-time key managerial personnel to hold office in more than one Company:

1. As per subsection 3 of Section 203 of the Companies Act, 2013, a whole-time key managerial personnel of a Company may hold office as whole-time key managerial personnel in its Subsidiary Company; and

2. As per third provision of subsection 3 of Section 203 of the Companies Act, 2013, a Company may appoint or employ a person as its managing director, if he is the managing director or manager of one, and of not more than one, other company and such appointment or employment is made or approved by a resolution passed at a meeting of the Board with the consent of all the directors present at the meeting and of which meeting, and of the resolution to be moved thereat, specific notice has been given to all the directors then in India.

2. Procedure for Appointment

To appoint a Managing Director in more than one company, the following procedure must be followed:

1. Provide specific Notice to all Directors of the Company present in India of the Meeting in which the Managing Director is to be appointed;

2. Obtain prior consent of all the directors present at the meeting;

3. Ensure that the appointment is not in contravention of any provisions of the Act or the Listing Regulations, if the company is listed.

4. Disclose the proposed appointment in the notice of the general meeting in which the appointment is to be approved;

5. Obtain the approval of the shareholders by way of a Ordinary Resolution.

3. Conclusion

In conclusion, the appointment of a Managing Director in more than one company is subject to certain restrictions and conditions under the Companies Act, 2013. A person can be appointed as the Managing Director in multiple companies subject to the prior unanimous approval of the Board of Directors and the shareholders in the General Meeting of the Company by passing a Ordinary Resolution. However, if the Company in which the whole-time key managerial personnel is to be appointed is the Subsidiary Company of the Company, then approval of majority of Directors in the Board Meeting shall suffice subject to the approval of the Members of the Company in the General Meeting by passing an Ordinary Resolution.