Page 297 - DMGT407Corporate and Business Laws

Corporate and Business Laws

Notes (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.

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Caution Section 268 states that an amendment of any provision relating to appointment or
reappointment of a managing director (or a whole-time 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].
For appointment of a managing, whole-time director or a manager, approval of the Central
Government would not be required if the following conditions were satisfied:

(i) he had not been sentenced to imprisonment for any period or to fine exceeding ` 1,000 for
conviction of an offence under any of the fourteen acts mentioned in Schedule XIII;
(ii) he had not been detained for any period under the Conservation of Foreign Exchange and
Prevention of Smuggling Activities Act 1974;
(iii) he has completed the age of 25 years but has not attained the age of 70 years;
(iv) he is not a managing or whole-time director or manager or in any way in whole-time
employment elsewhere;
(v) he is citizen of India and is resident in India;
(vi) the company had neither suffered loss nor had inadequate profits: (a) during the preceding
financial year immediate to the financial year in which appointment is made, or (b) in any
of the three financial years out of the four financial years immediately preceding.

In case any of the above conditions are not complied with, an application must be made to the
Central Government within 90 days of the appointment. If the appointment is not approved by
the Central Government the appointee shall vacate the office immediately on communication
of the decision by the Central Government.
Section 316 states that a person, who is either the managing director or the manager of any other
company (including a pure private company), cannot be appointed a managing director of a
public company or a private company which is a subsidiary of a public company. But such an
appointment can be made if the board of such company approves of the appointment by a
unanimous resolution passed at the Board meeting specific notice of which had been given to all
the directors then in India. Also the Central Government is empowered to permit, by order, the
same person to be managing director of more than one companies, if it is satisfied and it is
necessary for their proper working that the companies should function as a single unit and have
a common managing director.

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