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Unit 10: Share Capital

resolution of the company in general meeting will not have any effect unless approved by Notes
the Central Government and shall become void if and in so far as it is disapproved by the
Central Government. But if the increase in the number will not make the total number of
directors more than twelve, no approval of the Central Government is necessary. However,
independent private companies and Government companies are exempted from the
provisions of s.259.

(3) Individuals to be directors. No body corporate, association or firm shall be appointed
director of any company. Only an individual can be a director (s.253).
10.7.4 Managing Director

Section 2(26) defines ‘managing director’ as a ‘director’ who, by virtue of an agreement with the
company or of a resolution passed by the company in general meeting or by its Board of directors
or, by virtue of its memorandum or articles of association, is entrusted with substantial powers
of management which would not otherwise be exercisable by him. The expression includes a
director occupying the position of a managing director, by whatever name called.
However, the power to do administrative acts of routine nature when so authorised by the Board
such as the power to affix the common seal of the company to any document or to draw and

endorse any cheque on the account of the company in any bank or to draw and endorse any
negotiable instrument or to sign any certificate of share or to direct registration of transfer of any

share, shall not be deemed to be included within substantial powers of management. Further, a
managing director of a company shall exercise his powers subject to the superintendence, control
and direction of its Board of Directors.
Some of the more important legal provisions about managing directors are summarised as
follows:
(i) He, being a director, must be an individual.
(ii) He is appointed, usually to perform such functions and carry out such duties as may be
assigned to him by the Board of directors to whom he is responsible or subject. The Board
can revoke the authority of the managing director.
(iii) He must be entrusted with substantial powers of management.

(iv) There can be two or more than two managing directors in a company.
(v) A person cannot be appointed as managing director of more than two companies unless so
permitted by the Central Government.
His appointment is subject to the approval by the Central Government. The Central Government
upon application for permission to appoint a person as managing director of the company has
power to impose conditions. Ss. 268, 269, 316 and 317 are applicable to a public company or a
private company which is subsidiary of a public company.
Section 268 states that an amendment of any provision relating to appointment or reappointment
of a managing director (or a wholetime director) shall not be effective unless approved by the
Central Government and shall be become void if and in so far as, it is disapproved by the Central
Government.
Appointment of managing or whole-time director or manager to require government approval
only in certain cases (s.269). Every public company and/or private company which is subsidiary
of a public company having a paid-up share capital of not less than ` 5 crore must appoint either
a managing or a whole-time director or Manager. Also no approval of the Central Government

to the appointment of managerial personnel is required on fulfillment of certain conditions laid
down in Schedule XIII [including the minimum remuneration under s.198(4) as also increase in
the remuneration under Ss. 310 and 311].

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