Amended and updated notes on section 196 of Companies Act 2013. Detail discussion on provisions and rules related to appointment of managing director, whole-time director or manager.
Chapter XIII (Sections 196–205) of the Companies Act, 2013 (CA 2013) deals with the provisions related to appointment and remuneration of managerial personal. Section 196 of CA 2013 provides for appointment of managing director, whole-time director or manager.
Recently, we have discussed in detail section 193 (Contract by One Person Company) of CA 2013. Today, we learn the provisions of section 196 of Companies Act 2013.
The provisions of section 196 are effective from 1-April-2014. You may refer Notification No. S.O. 902(E) issued dated 27-03-2014. In this article, you will learn detail of the provisions of section 196 of the Companies Act 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.
| Name of Act | The Companies Act 2013 |
|---|---|
| Enacted by | Parliament of India |
| Administered by | Ministry of Corporate Affairs (MCA) |
| Number of Chapters | 29 |
| Number of Sections | 484 (470-43+57) |
| Number of Schedules | 7 |
| You are reading: | |
| Chapter No. | XIII |
| Chapter Name | Appointment and Remuneration of Managerial Personal |
| Section No. | 196 |
| Section Name | Appointment of managing director, whole-time director or manager |
| Monthly Updated Edition | Company Law PDF |
Section 196 of Companies Act 2013: Appointment of managing director, whole-time director or manager
Section 196 shall come into force on 1st April, 2014 vide Notification No. S.O. 902(E) issued dated 27.03.2014.
(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:
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:
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;
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 Part I of that Schedule:
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:
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.
Exception/ Modification/ Adaptation:
- 1) In case of Government company, sub-sections (2), (4) and (5) of section 196 shall not apply. – Notification No. G.S.R. 463(E) dated 5th June, 2015.
- 2) In case of Private company, sub-sections (4) and (5) of section 196 shall not apply. – Notification No. G.S.R. 464(E) dated 5th June, 2015.
- 3) In case of a Specified IFSC public company, sub-section (4) of section 196 shall not apply. -Notification No. G.S.R. 08(E) dated 4th January, 2017.