APPOINTMENT OF MANAGERIAL PERSONNEL UNDER COMPANIES ACT, 2013

[Mr. M. GOVINDARAJAN]

Who are managerial personnel?

The heading of Section196 indicates the appointment of managing director, whole time director or manager.   Can we take the said three as managerial personnel?  Schedule V refers the managerial personnel as a managing or whole time director or a manager. 

Conditions for appointment

As per Section 196

Section 196 (3) provides that 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 21 years  or has attained the age of 70 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.

That appointment of a person who has attained the age of 70 years may be made by passing a special resolution in which case the explanatory statement annexed to the notice for such notion shall indicate the justification for appointing such person.

As per Schedule V

Schedule V, Part I deals with the conditions to be fulfilled for the appoint of a managing or whole time director or a manager without the approval of the Central Government.    The conditions are as follows:

• he had not been sentenced to imprisonment for any period, or to a fine exceeding Rs.1,000/- for the conviction of an offence under any of the following Acts, namely:-

• 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;
• the Securities Contracts (Regulation) Act, 1956;
• the Wealth Tax Act, 1957;
• the Income Tax Act, 1961;
• the Customs Act, 1962;
• the Competition Act, 2002;
• the Foreign Exchange Management Act;
• the Sick Industrial Companies (Special Provisions)Act, 1985;
• the Securities and Exchange Board of India Act, 1992;
• the Foreign Trade (Development and Regulation) Act, 1992;
• the Prevention of Money-laundering Act, 2002;

• he had not been detained for any period under the Conservation  of Foreign Exchanged and Prevention of Smuggling Activities Act, 1974;
• he is a resident in India;
• he has completed the age of 21 years and has not attained the age of 70 years.

The above said conditions shall not apply to the companies in Special Economic Zones as notified by Department of Commerce from time to time. 

Where the Central Government has given its approval to the appointment of a person convicted or detained under Schedule V no further approval of the Central Government shall be necessary for the subsequent appoint of the person if he had not been so convicted or detained subsequent to such approval.

Where he has attained the age of 70 years and where his appointment is approved by a special resolution passed by the company in general meeting, no further approval of the Central Government shall be necessary for such appointment.

Resident in India

For the purpose of Schedule V, resident in India includes a person who has been staying in India for a continuous period of not less than 21 months immediately preceding the date of his appointment as a managerial person and  who has come to India-

• for taking up employment in India; or
• for carrying on a business or vacation in India.

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

Section196 (4) provides that subject to the provisions of Section197 and Schedule V a managing director, whole time director or manager shall be appointed.  The terms and conditions of such appointment and remuneration payable shall be approved by the Board of Directors at a meeting which shall be subject to approval by a resolution f the next general meeting of the company and by the Central Government in case such appoint is at variance to the conditions specified in Schedule V.

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.

A return in the form MR - 1 along with the fee prescribed shall be filed within 60 days of such appointment with the Registrar.

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.