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Section 196

Appointment of managing director, whole-time director or manager

(1)
No company shall appoint or employ at the same time a managing director and a manager.
(2)
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:
Proviso

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

(3)
No company shall appoint or continue the employment of any person as managing director, whole-time director or manager who —
(a)
is below the age of twenty-one years or has attained the age of seventy years:
Proviso

Provided that appointment of a person who has attained the age of seventy years may be made by passing a special resolution in which case the explanatory statement annexed to the notice for such motion shall indicate the justification for appointing such person;

Proviso

Provided further that where no such special resolution is passed but votes cast in favour of the motion exceed the votes, if any, cast against the motion and the Central Government is satisfied, on an application made by the Board, that such appointment is most beneficial to the company, the appointment of the person who has attained the age of seventy years may be made.

(b)
is an undischarged insolvent or has at any time been adjudged as an insolvent;
(c)
has at any time suspended payment to his creditors or makes, or has at any time made, a composition with them; or
(d)
has at any time been convicted by a court of an offence and sentenced for a period of more than six months.
(4)
Subject to the provisions of section 197 and Schedule V, a managing director, whole-time director or manager shall be appointed and the terms and conditions of such appointment and remuneration payable be approved by the Board of Directors at a meeting which shall be subject to approval by a resolution at the next general meeting of the company and by the Central Government in case such appointment is at variance to the conditions specified in that Schedule specified in Part I of that Schedule :
Proviso

Provided that a notice convening Board or general meeting for considering such appointment shall include the terms and conditions of such appointment, remuneration payable and such other matters including interest, of a director or directors in such appointments, if any:

Proviso

Provided further that a return in the prescribed form shall be filed within sixty days of such appointment with the Registrar.

(5)
Subject to the provisions of this Act, where an appointment of a managing director, whole-time director or manager is not approved by the company at a general meeting, any act done by him before such approval shall not be deemed to be invalid.
Notes, amendments & references (9)

2 ) 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: Shall not apply to a Government Company. vide notification no.G.S.R. 463(E) dated 5th June, 2015.

(The exceptions, modifications and adaptations provided above shall be applicable only to those Government Companies which has not committed a default in filing its financial statements under section 137 of the said act or annual return under section 92 of the said act with the registrar, vide notification dated 13th June, 2017)

To view the notification, Click Here

Provided further that Inserted vide Companies (Amendment) Act, 2017 dated 03.01.2018 effective from 12.09.2018. To view the notification, Click Here

4 ) Shall not apply to a Government Company and Private Company and specified IFSC Public Companies vide notification no.G.S.R. 463(E) and G.S.R. 464(E) dated 5th June, 2015 and GSR 08(E) dated 4th January, 2017 respectively.

(The exceptions, modifications and adaptations provided above shall be applicable only to those Private Companies which has not committed a default in filing its financial statements under section 137 of the said act or annual return under section 92 of the said act with the registrar, vide notification dated 13th June 2017)

Substituted vide Companies (Amendment) Act, 2017 dated 03.01.2018 effective from 12.09.2018. To view the notification,To view the notification, Click Here

Refer rule 3 and Form No.MR-1 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules,2014. To view the rule, Click Here

5 ) Subject to the provisions of this Act, where an appointment of a managing director, whole-time director or manager is not approved by the company at a general meeting, any act done by him before such approval shall not be deemed to be invalid. Shall not apply to a Government Company and Private Company. vide notification no.G.S.R. 463(E) and G.S.R. 464(E) dated 5th June, 2015 respectively .