Appointment of Managing Director Process And Draft

As we Know, a Company is a legal person, which is managed and controlled by group of individuals called board of directors. Among the directors, an individual appointed to handle various important work, fulfil stakeholder’s expectation and maximise the wealth of the company, that individual can be termed as Managing Director of the Company. Every Listed Company and every other Public Company having a paid-up capital of rupees Ten crore or more is reqruied to have whole-time Key Managerial Personnel.

Legally, sub-section 54 of Section 2 of Companies Actm 2013 defines a Managing Director as:

a director who

by virtue of the articles of a company or

an agreement with the company or

a resolution passed in its general meeting, or

by its Board of Directors,

is entrusted with substantial powers of management of the affairs of the company and

includes a director occupying the position of managing director, by whatever name called.

Under Company law various provisions deal with appointment of Managing Director such as:

Appointment and Remuneration of Managerial Personnel, Rules 2014,

Appointment and Qualification of Director, Rules 2014

Meetings of Board and its Powers, Rules 2014.

CONDITIONS FOR THE APPOINTMENT OF MANAGING DIRECTOR

No company shall appoint or continue the employment of any person as Managing Director, whole-time director or manager who —

is below the age of twenty-one years or has attained the age of seventy years;

is an undischarged insolvent or has at any time been adjudged as an insolvent;

has at any time suspended payment to his creditors or makes, or has at any time made, a composition with them; or

has at any time been convicted by a court of an offence and sentenced for a period of more than six months.

he had not been sentenced to imprisonment for any period, or to a fine exceeding one thousand rupees, for the conviction of an offence under the Act mentioned in Schedule V of the Companies Act, 2013, some Acts mentioned below, for list refer schedule V of the Act:

the Indian Stamp Act, 1899;

the Central Excise Act, 1944;

the Industries (Development and Regulation) Act, 1951;

the Prevention of Food Adulteration Act, 1954;

the Essential Commodities Act, 1955;

the Companies Act, 2013 or any previous company law;

the Securities Contracts (Regulation) Act, 1956; etc.

he had not been detained for any period under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974;

he is resident of India.

Note: Resident in India includes a person who has been staying in India for a continuous period of not less than twelve months immediately preceding the date of his appointment as a managerial person and who has come to stay in India, -

for taking up employment in India; or

for carrying on a business or vacation in India.

This condition shall not apply to the companies in Special Economic Zones as notified by Department of Commerce from time to time

Question: Whether Non-resident can become a Manging Director in India?

Answer: A person, being a non-resident in India shall enter India only after obtaining a proper Employment Visa from the concerned Indian mission abroad. For this purpose, such person shall be required to furnish, along with the visa application form, profile of the company, the principal employer and terms and conditions of such person’s appointment.

PROCEDURE FOR APPOINTMENT OF MANAGING DIRECTOR

Steps Procedure

Documentation Take prior consent from the incumbent inform DIR-2 along with a declaration that he is not disqualified to become a director under the Act in Form DIR-8.Approval of Board The Directors shall hold a Board Meeting:

To Obtain approval of Board for appointment of Managing Director

To approve the terms and conditions on which MD is proposed to be appointment.

To fix the date, time and venue of General Meeting to get approval of shareholders by passing Resolution.

Filling of Forms with ROC Following Forms are required to be filed with ROC after passing Board Resolution:

DIR-12 within 30days of passing of Board Resolution.

MGT-14 within 30days of passing of Board Resolution.

MR-1 within 60days of passing of Board Resolution.

Convene General Meeting & pass Special Resolution Issue 21 days clear notice to hold General Meeting and pass a Special Resolution for appointment of Managing Director Filing of Form MGT-14 Within days of the passing of Special Resolution

OTHER PROVISIONS FOR APPOINTMENT:

No company shall appoint or employ at the same time a Managing Director and a Manager.

No company shall appoint or re-appoint any person as its managing director, whole-time director or manager for a term exceeding five years at a time except Government companies.

No re-appointment shall be made earlier than one year before the expiry of his term.

The minimum & Maximum age for appointment as MD is 21 years and 70 years respectively.

Draft of Minutes of Board Meeting:

MINUTES OF THE MEETING OF THE NOMINATION AND REMUNERATION COMMITTEE OF M/S (NAME OF COPMANY) HELD ON THE (DATE) DAY OF (MONTH), 20(YEAR) AT THE REGISTERED OFFICE OF THE COMPANY AT (REGISTERED OFFICE) AT (TIME)

PRESENT:

1) X (Executive Director)

2) B (Non-Executive Director)

3) N (Independent Director)

1) CHAIRMAN:

Mr. B, an Independent Director being elected as a Chairman of the meeting on unanimous vote took the chair.

2) LEAVE OF ABSENCE:

There has been no leave of absence.

3) QUORUM:

The chairman after welcoming the members, considered the requisite quorum present declared the meeting open for discussion.

4) MINUTES OF THE PREVIOUS MEETING:

The minute of the previous committee meeting held on 30/11/2019 was circulated, considered, noted and signed by the chairman.

5) NOTICE:

The notices placed before the members were considered and the matters were taken up chronologically.

6) APPOINTMENT OF (DIRECTOR’S NAME WITH DIN) AS A MANAGING DIRECTOR (WHOLE TIME KEY MANAGERIAL PERSONNEL):

The Chairman apprised the members that the Board of directors of the Company has referred the name of (Director’s name with DIN) which was proposed by Mr. ____ for the appointment as an executive Managing Director of the company w.e.f _ as per the requirement u/s 196, 197 and schedule V of the Companies Act, 2013 and also for the smooth functioning of the company since the tenure of the existing executive Managing Director of the company shall expire on the (date). Considering the requirement of the company and the past experiences the committee members/Board has passed the following resolution unanimously:

“RESOLVED THAT pursuant to the provisions of sec 196, 197, 203, Schedule V and any other applicable provisions of the Companies Act, 2013 read with Rule 3 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 (including any statutory modification or re-enactment thereof), the Nomination & Remuneration Committee recommends the appointment of (Director) (Din: ________) as the Managing Director (Whole Time key Managerial Personnel) of the company for a term of five years commencing from (date) till (date) subject to the appointment made by the Board of directors at the Board meeting and thereafter approval of the shareholders in the ensuing Extra-Ordinary General Meeting as per the terms and conditions mutually agreed upon between the Company and (Director).

RESOLVED FURTHER THAT the following terms and conditions to be approved considering the limit specified under sec 197 and Schedule V of the Companies Act, 2013:

Salary: Rs. ___________ /- per month as basic;

Dearness Allowance: Rs. _________ /- per month;

Bonus: if any;

Gratuity: as per the Rules of the company, subject to completion of service of 5 years at the rate of half a month’s salary for each year of completed service with effect from _____________;

Provident Fund: Company’s contribution to provident fund to the extent the same is not taxable under the Income Tax Act, 1961;

Benefits, Perquisites and Allowances:

Provision of a Car with driver for official purposes and such driver’s remuneration/expenses as fixed/approved by the Board shall be reimbursed to him, if he is not provided with Company’s driver;

Free use of Company’s mobile phone and telephone at his residence;

Reimbursement of medical expenses incurred for himself and family subject to ceiling of one month’s salary in a year or three month’s salary over a period of 3 years;

RESOLVED FURTHER THAT in the event of no profit or the profit of the company is inadequate, during the currency of tenure of managerial personnel, the company may pay remuneration to the managerial remuneration not exceeding the limit under section II of the Schedule V of the Companies Act, 2013 subject to the minimum remuneration as prescribed above including any statutory modifications or re-enactment thereof from time to time as prescribed by the Government.

RESOLVED FURTHER THAT the consent in writing from (Director) in form DIR-2 pursuant to the Rule 8 of the Companies (Appointment & Qualifications of Directors) Rules 2014 and intimation in Form DIR-8 pursuant to the Rule 14 of the Companies (Appointment & Qualifications of Directors) Rules 2014 that he is not disqualified under section 164 sub-section (2) of the Companies Act, 2013 have been received by the company and considered by the committee.

RESOLVED FURTHER THAT the Chairman of the committee be & is hereby authorized to place the draft minutes of the committee meeting and the documents received by (Director) before the Board of Directors meeting to fulfil the further requirement for the appointment of (Director) as a Managing director.”

VOTE OF THANKS

There being no other business, the meeting concluded with a vote of thanks to the chair.

Place:

Dated: (Chairperson)

NOTICE FOR CONVENING THE ____ MEETING OF THE BOARD OF DIRECTORS FOR THE YEAR 20__:

Mr. A (Chairman)

Ms. B (Independent Director)

Mr. C (Independent Director)

Mr. D (Non-Executive Director)

Ms. E (Managing Director)

Ms. F (Whole Time Director)

Mr. G (Executive Director)

Dear Sir/Madam, Notice is hereby given to the Board of Directors of the company u/s 173 of the Companies act, 2013 read with Rule 12 of the Companies (Meetings of Board and its Powers) Rules, 2014 and the Secretarial Standards 1 that the meeting of the Board of Directors of the company is scheduled to be held at the Registered office of the company on the Day of , 20 at (Time). to transact the matters mentioned on the following agenda.

Agenda to be taken up at the meeting:

Welcome to the Chairman of the Company and Confirmation of Quorum;

To grant leave of absence, if any, to the Directors absent;

To consider, confirm and take note of the minutes of the previous Board Meeting;

To consider, confirm and take note of the Minutes of the previous meeting of the nomination & remuneration committee;

Disclosure of interest or any changes thereof, if any;

To appoint (Director) as the Managing Director (whole time Key Managerial Personnel);

To consider and approve the draft notice of the Extra-Ordinary General Meeting and the authorization to the company secretary to circulate the notice of the extra ordinary general meeting;

Any other business with the permission of the chair

Please make it convenient to attend the meeting.

Thanking you,

Yours faithfully

Place: __________ (………………………………)

Date: __________ Company Secretary

NOTES ON AGENDA OF THE ____ MEETING OF THE BOARD OF DIRECTORS FOR THE YEAR 20__ TO BE HELD AT THE REGISTERED OFFICE OF THE COMPANY ON THE DAY OF (MONTH), 20__ AT 3:00 P.M. TO TRANSACT THE FOLLOWING MATTERS:

ITEM NO. 1: TO WELCOME THE CHAIRMAN FOR THE MEETING AND CONSIDER THE QUORUM:

The Chairman shall take the chair and welcome the directors present at the meeting and consider the requisite quorum present for the deliberations at the meeting.

ITEM NO.2: TO GRANT LEAVE OF ABSENCE, IF ANY TO THE DIRECTORS:

The chairman shall consider the leave of absence received from the directors not present at the meeting.

ITEM NO. 3: TO CONFIRM AND TAKE NOTE THE MINUTES OF THE PREVIOUS BOARD MEETING:

The minutes of the previous Board Meeting held on the _ day of ____, _ shall be circulated, noted and the same to be signed by the Chairman.

ITEM NO. 4: TO CONFIRM AND TAKE NOTE OF THE MINUTES OF THE PREVIOUS MEETING OF THE NOMINATION & REMUNERATION COMMITTEE:

The minutes of the previous meeting of the nomination & remuneration committee held on the _ day of ____, 20 shall be circulated, confirmed, noted and the same to be signed by the Chairman.

ITEM NO. 5: DISCLOSURE OF INTEREST OR ANY CHANGES THEREOF, IF ANY:

The Company shall take note of the disclosure of interest or any changes thereof, if any, received by the Directors in the form MBP-1 u/s 184 of the Companies Act, 2013 read with Rule 9 of the Companies (Meetings of Board and its Powers) Rules, 2014;

ITEM NO.6: APPOINTMENT OF (DIRECTOR) (DIN: _________) AS THE MANAGING DIRECTOR (WHOLE TIME KEY MANAGERIAL PERSONNEL):

The Board shall appoint (Director) as the managing director (whole time key managerial personnel) u/s 196, 197, Schedule V, 203 of the Companies Act, 2013 as recommended by the Nomination and Remuneration Committee for the term of 5 years commencing from 31/03/2020 to 30/03/2025 subject to the approval of the shareholders in the ensuing Extra Ordinary General Meeting as per the terms and conditions mutually agreed upon between the directors and (Director);

ITEM NO. 7: TO CONSIDER AND APPROVE THE DRAFT NOTICE OF THE EXTRA-ORDINARY GENERAL MEETING AND THE AUTHORIZATION TO THE COMPANY SECRETARY TO CIRCULATE THE NOTICE OF THE EXTRA-ORDINARY GENERAL MEETING:

The director shall consider the draft notice of the Extra Ordinary General Meeting along with the Explanatory Statement for the fixation of the day, date, time and venue to take the approval of the Shareholders for the appointment of (Director) as the Managing Director (Whole Time Key Managerial Personnel). The directors shall authorize the Company Secretary to circulate the notice of the extra ordinary general meeting to all the Members, Auditors, Directors on behalf of the Board as per sec 101, 102 of the Companies Act, 2013 and Secretarial Standards 2;

ITEM NO. 8: ANY OTHER BUSINESS WITH THE PERMISSION OF THE CHAIR:

The directors may take up any other matter to have deliberation on with the consent of the Chairman.

Minutes of Board Meeting

MINUTES OF THE MEETING OF THE BOARD OF DIRECTORS FOR THE FINANCIAL YEAR _______ OF COMPANY HELD AT THE REGISTERED OFFICE OF THE COMPANY AT ————– ON THE ____ DAY OF MONTH, 20__ (DAY) AT TIME

Time of Commencement: (Time) Time of Conclusion: (Time)

PRESENT:

(a) CHAIRMAN:

Ms. A, being the Chairman of the company took the chair and welcomed the directors.

(b) QUORUM:

The chairman after welcoming the directors considered the requisite quorum present and declared the meeting open for discussion.

(b) LEAVE OF ABSENCE:

There has been no leave of absence.

MINUTES OF THE PREVIOUS MEETING:

The minutes of the previous meeting held on _________ was circulated, considered, noted and signed by the chairman.

MINUTES OF THE PREVIOUS MEETING OF THE NOMINATION & REMUNERATION COMMITTEE:

The minute of the previous committee meeting held on __________ was circulated, considered, and noted.

NOTICE OF THE MEETING:

The notices placed before the members were considered and the matters were taken up chronologically.

GENERAL NOTICE IN FORM MBP-1 BY THE DIRECTORS PURSUANT TO SECTION 184(1) OF THE COMPANIES ACT, 2013 READ WITH RULE 9(1) OF THE COMPANIES (MEETING OF BOARD AND ITS POWERS) RULES, 2014:

There has been no change in the concern or interest in any company or companies or body corporate, firms or other association of individuals.

APPOINTMENT OF DIRECTOR (DIN :——-) AS THE MANAGING DIRECTOR (WHOLE TIME KEY MANAGERIAL PERSONNEL) :

The Chairman apprised the members that the Board of directors of the Company has referred the name of (Director’s name with DIN) which was proposed by Mr. ____ for the appointment as an executive Managing Director of the company w.e.f _ as per the requirement u/s 196, 197 and schedule V of the Companies Act, 2013 and also for the smooth functioning of the company since the tenure of the existing executive Managing Director of the company shall expire on the (date). Considering the requirement of the company and the past experiences the committee members/Board has passed the following resolution unanimously:

“RESOLVED THAT pursuant to the provisions of sec 196, 197, 203, Schedule V and any other applicable provisions of the Companies Act, 2013 read with Rule 3 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 (including any statutory modification or re-enactment thereof), the Nomination & Remuneration Committee recommends the appointment of (Director) (Din: ________) as the Managing Director (Whole Time key Managerial Personnel) of the company for a term of five years commencing from (date) till (date) subject to the appointment made by the Board of directors at the Board meeting and thereafter approval of the shareholders in the ensuing Extra-Ordinary General Meeting as per the terms and conditions mutually agreed upon between the Company and (Director).

RESOLVED FURTHER THAT the following terms and conditions to be approved considering the limit specified under sec 197 and Schedule V of the Companies Act, 2013:

Salary: Rs. ___________ /- per month as basic;

Dearness Allowance: Rs. _________ /- per month;

Bonus: if any;

Gratuity: as per the Rules of the company, subject to completion of service of 5 years at the rate of half a month’s salary for each year of completed service with effect from _____________;

Provident Fund: Company’s contribution to provident fund to the extent the same is not taxable under the Income Tax Act, 1961;

Benefits, Perquisites and Allowances:

Free use of Company’s mobile phone and telephone at his residence;

Reimbursement of medical expenses incurred for himself and family subject to ceiling of one month’s salary in a year or three month’s salary over a period of 3 years;

Actual leave travel expenses, as per the rules of the company, excluding hotel and food charges once in a year to any place in India to himself and his family.

RESOLVED FURTHER THAT in the event of no profit or the profit of the company is inadequate, during the currency of tenure of managerial personnel, the company may pay remuneration to the managerial remuneration not exceeding the limit under section II of the Schedule V of the Companies Act, 2013 subject to the minimum remuneration as prescribed above including any statutory modifications or re-enactment thereof from time to time as prescribed by the Government.

RESOLVED FURTHER THAT the consent in writing from (Director) in form DIR-2 pursuant to the Rule 8 of the Companies (Appointment & Qualifications of Directors) Rules 2014 and intimation in Form DIR-8 pursuant to the Rule 14 of the Companies (Appointment & Qualifications of Directors) Rules 2014 that he is not disqualified under section 164 sub-section (2) of the Companies Act, 2013 have been received by the company and considered by the committee.

RESOLVED FURTHER THAT the Chairman of the committee be & is hereby authorized to place the draft minutes of the committee meeting and the documents received by (Director) before the Board of Directors meeting to fulfil the further requirement for the appointment of (Director) as a Managing director.”

CONSIDER AND APPROVE THE DRAFT NOTICE OF THE EXTRA ORDINARY GENERAL MEETING AND THE AUTHORIZATION TO THE COMPANY SECRETARY TO CIRCULATE THE NOTICE OF THE EXTRA ORDINARY GENERAL MEETING:

The chairman placed the draft notice before the board to consider the date, time, venue, day of the Extra Ordinary General Meeting of the Company to seek the approval of the shareholders for the appointment of (Director) (DIN: ……) as a Managing Director (Whole Time key Managerial Personnel). The Board took note of the same and passed the following resolution unanimously:

“RESOLVED THAT the notice of the Extra Ordinary General Meeting of the Company to be held on the _ day of Month, 20, day at the registered office of the Company at Time be & is hereby approved to transact the following matters:

To approve the eligibility, appointment, remuneration, terms and conditions and the appointment of Director (DIN: ….) as the Managing Director and whole time Key Managerial Personnel by the Board.

“FURTHER RESOLVED THAT Ms. S (Company Secretary) of the Company be & is hereby authorized to circulate the notice of the Extra Ordinary General Meeting to all the Members, Auditors, Directors on behalf of the Board as per sec 101, 102 of the Companies Act, 2013 and Secretarial Standards 2.”

8) VOTE OF THANKS

Appointment of Managing Director Process And Draft

Legally, sub-section 54 of Section 2 of Companies Actm 2013 defines a Managing Director as:

Under Company law various provisions deal with appointment of Managing Director such as:

No company shall appoint or continue the employment of any person as Managing Director, whole-time director or manager who —

Note: Resident in India includes a person who has been staying in India for a continuous period of not less than twelve months immediately preceding the date of his appointment as a managerial person and who has come to stay in India, -

Question: Whether Non-resident can become a Manging Director in India?

Convene General Meeting & pass Special Resolution Issue 21 days clear notice to hold General Meeting and pass a Special Resolution for appointment of Managing Director Filing of Form MGT-14 Within days of the passing of Special Resolution

Mr. B, an Independent Director being elected as a Chairman of the meeting on unanimous vote took the chair.

There has been no leave of absence.

The chairman after welcoming the members, considered the requisite quorum present declared the meeting open for discussion.

The minute of the previous committee meeting held on 30/11/2019 was circulated, considered, noted and signed by the chairman.

The notices placed before the members were considered and the matters were taken up chronologically.

RESOLVED FURTHER THAT the following terms and conditions to be approved considering the limit specified under sec 197 and Schedule V of the Companies Act, 2013:

There being no other business, the meeting concluded with a vote of thanks to the chair.

Place:

Dated: (Chairperson)

Agenda to be taken up at the meeting:

Please make it convenient to attend the meeting.

Thanking you,

Yours faithfully

Place: __________ (………………………………)

Date: __________ Company Secretary

The Chairman shall take the chair and welcome the directors present at the meeting and consider the requisite quorum present for the deliberations at the meeting.

The chairman shall consider the leave of absence received from the directors not present at the meeting.

The minutes of the previous Board Meeting held on the ___ day of __________, _____ shall be circulated, noted and the same to be signed by the Chairman.

The minutes of the previous meeting of the nomination & remuneration committee held on the ___ day of ________, 20__ shall be circulated, confirmed, noted and the same to be signed by the Chairman.

The Company shall take note of the disclosure of interest or any changes thereof, if any, received by the Directors in the form MBP-1 u/s 184 of the Companies Act, 2013 read with Rule 9 of the Companies (Meetings of Board and its Powers) Rules, 2014;

The directors may take up any other matter to have deliberation on with the consent of the Chairman.

Minutes of Board Meeting

Time of Commencement: (Time) Time of Conclusion: (Time)

Ms. A, being the Chairman of the company took the chair and welcomed the directors.

The chairman after welcoming the directors considered the requisite quorum present and declared the meeting open for discussion.

There has been no leave of absence.

The minutes of the previous meeting held on _________ was circulated, considered, noted and signed by the chairman.

The minute of the previous committee meeting held on __________ was circulated, considered, and noted.

The notices placed before the members were considered and the matters were taken up chronologically.

There has been no change in the concern or interest in any company or companies or body corporate, firms or other association of individuals.

RESOLVED FURTHER THAT the following terms and conditions to be approved considering the limit specified under sec 197 and Schedule V of the Companies Act, 2013:

“RESOLVED THAT the notice of the Extra Ordinary General Meeting of the Company to be held on the ___ day of Month, 20__, day at the registered office of the Company at Time be & is hereby approved to transact the following matters:

To approve the eligibility, appointment, remuneration, terms and conditions and the appointment of Director (DIN: ….) as the Managing Director and whole time Key Managerial Personnel by the Board.

“FURTHER RESOLVED THAT Ms. S (Company Secretary) of the Company be & is hereby authorized to circulate the notice of the Extra Ordinary General Meeting to all the Members, Auditors, Directors on behalf of the Board as per sec 101, 102 of the Companies Act, 2013 and Secretarial Standards 2.”

There being no other business to transact, the meeting concluded with a vote of thanks to the chair.

Place:

Dated: (Chairperson)

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The minutes of the previous Board Meeting held on the _ day of ____, _ shall be circulated, noted and the same to be signed by the Chairman.

The minutes of the previous meeting of the nomination & remuneration committee held on the _ day of ____, 20 shall be circulated, confirmed, noted and the same to be signed by the Chairman.

“RESOLVED THAT the notice of the Extra Ordinary General Meeting of the Company to be held on the _ day of Month, 20, day at the registered office of the Company at Time be & is hereby approved to transact the following matters: