Page 298 - DMGT407Corporate and Business Laws

Unit 12: Management of Companies

Section 317 states that the term of office of a managing director cannot exceed five years at a Notes
time. Also re-appointments or extension can be made on the basis of 5 years tenure on each
occasion, provided each time the re-appointment or extension is made by the company during
two years of the existing term.
It may be emphasized that Ss.268, 269 and 317 relating to restrictions on appointment of managing
directors (as noted above) do not apply to pure private companies.
Disqualification of a managing director. Section 267 prohibits the appointment or employment
or the continuance of the appointment or employment of any person by a company as its
managing director or whole-time director, if the said person: (i) is an undischarged insolvent or
has at any time been adjudged an insolvent; (ii) suspends, or has at any time suspended payment
to his creditors, or makes or has at any time made a composition with them; or (iii) is or has at
any time, been convicted by a court of an offence involving moral turpitude.
It may be noted that these disqualifications are in addition to the ones mentioned in s.272
(i.e., disqualifications of a director).

Did u know? Whole Time Director

In many sections of the Companies Act, the term ‘Whole time director’ has been used side
by side with that of the ‘managing director’. While the term ‘managing director’ has been
specifically defined under Section 2(26), no such definition of a whole time director is
available. Explanation to Section 269, however, states that the expression ‘whole time
director’ includes a director in the whole time employment of the company.
Regarding appointment/re-appointment and remuneration of whole time director, same
provisions as are applicable to a managing director, are applicable. Under section 269, every
public company and a private company which is a subsidiary of a public company must have a
managing director a whole-time director if its paid-up share capital is ` 5 crores or more.
Similarly Sections 267 and 268 providing for disqualifications of managing directors and approval
of Central Government for their appointment/re-appointment also make the provisions
applicable to whole time directors. Also, the provisions of Sections 309, 310 and 311 dealing with
remuneration of directors and other managerial personnel are applicable to whole time directors.

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Caution The following points of distinction between a managing director and a whole
time director must be noted:
1. A managing director may be appointed in that capacity in two or more companies
at the same time but a whole-time director, by virtue of his whole time employee
cannot act as such in more than one company.
2. The tenure of a managing director of a public company or a private company which
is the subsidiary of a public company cannot be more than five years at a time. There
is no such restriction in the case of a whole-time director.

12.2.1 Manager

Section 2(24) states that “manager means an individual who, subject to the superintendence,
control and direction of the Board of Directors, has the management of the whole, or substantially
the whole of the affairs of the company and includes a director or any other person occupying
the position of a manager, by whatever name called and whether under a contract of service or
not”.

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