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CS Dives Goyal

Practicing Company Secretary, Delhi

Mob: +91- 8130757966


csdiveshgoyal@gmail.com

CS Divesh Goyal

PROCEDURE & REQUIREMENT OF APPOINTMENT OF MD


FOR PRIVATE LIMITED COMPANY
Appointment of Managing Director, Whole- Time Director OR Manager (Section: 196):

SERIES
NO- 11

This Section is applicable on Both Private as well as Public companies. Only this section of
Chapter-XIII applicable on Private Companies. At the time of practical working on this
section, some points create difficulties, because for appointment of Managerial Personnel
company have to comply with provisions of Section- 196 and have to leave all other
sections of this chapter.
MY OPINION: As per Law, there is no compulsion for private company to appoint MD, WTD
and Manager. As per Act Private Company can be in continue working without MD, WTD
and manager throughout the life of company.
But problems arise when Private company appoint any Managerial Personnel willingly.
Then company requires following Section: 196 of CA-2013.
SECTION- 196:
 A company can appoint either Managing Director or Manager not both {Sub
section (1)}.
 MD, WTD and Manager can be appoint for maximum tenure of 5 years. But company
may reappoint them for next term of 5 Years or lesser period, before expiry of
existing term.
 But re-appointment cannot be done earlier than one year before expiry of the term.
This means, company may re-appoint them for next term in last one year of current
term.
 The minimum age for appointment for these positions is twenty one years and
normal retirement age is seventy years. (So the person who does not attain age of 21
year cant appoint as Managerial Personnel).
 But a person who has attained age of 70 year can be appoint as Managerial
Personnel, by passing of Special Resolution in General Meeting, Condition:
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Practicing Company Secretary, Delhi

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Explanatory Statement justifying such appointment shall be annexed to the notice of


General Meeting for motion of appointment.
 For appointment of a person who has attained age of 70 year following procedure:
Call a Board Meeting
Issue notice of General Meeting
Pass Special Resolution In General Meeting.
File MGT-14 with ROC within 30 days of passing of Resolution.
File form DIR-12 and MR-1 with ROC with in 30 days of passing of
resolution of appointment.
 To appoint a person as Managerial personnel:
Appointee should not be an un-discharged insolvent nor has any time been
adjudged as an insolvent.
Appointee has not any time suspended payment to his creditors or has
made a composition with them.
Appointee should not be a convict of an offence and sentenced for a period
of more than six months. {Sub section (3)
APPOINTMENT OF MANAGERIAL PERSONNEL:For appointment of Managerial Personnel in private company we have to do following
things:
1. Require to pass Board Resolution.
2. Require approval of Share Holders in General Meeting.
3. Follow the provisions of Schedule V of Companies Act, 2013. (If there is any
variance to the conditions specified in the schedule, this appointment shall also be
subject to the approval of the Central Government. {Sub section (3)})
PROCEDURE FOR APPOITNT OF MANAGERIAL PERSONNEL IF COMPANY HAS
ADEQUATE PROFIT:
Issue Notice for Calling Board Meeting. Notice shall include:
 Terms and conditions of such appointment.
 Remuneration payable to such Managerial Personnel.
 Interest of Directors in such appointment.

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CS Dives Goyal
Practicing Company Secretary, Delhi

Mob: +91- 8130757966


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Documents Require from Appointee:


 Declaration that he is not disqualified to appoint as director. (Secion152(4).
 Consent that he is willing to appoint as director.(Section-152(5).
 Consent that he is willing to appoint as Managing Director.
Pass Resolution in Meeting for appointment of Managerial Personnel.
File Form MGT-14 within 30 days of passing of resolution. (Secion-179)
File Form DIR-12 within 30 days of passing of resolution.
File Form MR-1 within 60 days of passing of resolution. (Section-196).
GM; which will help after this appointment, Take Approval of Shareholders by
passing of resolution.
DRAFT FORMATS ATTACHED BELOW:
Notice Calling Board Meeting.
Agenda of Board Meeting.
Attendance Sheet of Board Meeting.
Leave of Absence, if require.
Declaration under section 152(4)
Consent under section 152(5)
Consent to act as Managerial Personnel.
Draft MD Agreement, if require.
Draft Board Meeting Resolution.
Will explain in my next article Process of filling, filing and attachments of form MR-1.

FAQS:
1. Is it mandatory to file the return of appointment of Managerial Personnel
appointed in terms of Section 196?
Ans. Yes it is mandatory for a company to file a return of appointment of a
managing director, whole time director or manager, chief executive officer,
company secretary and Chief Financial officer in Form no. MR.1 as prescribed in
Rule 3 of the Companies (Appointment and Remuneration of Managerial Personnel)
Rules, 2014. Further, particulars of appointment of Managerial Personnel and any
change among them are also required to be filed in Form DIR-12.

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CS Dives Goyal
Practicing Company Secretary, Delhi

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2. Can a company have two Managing Directors?


Ans: As per third proviso to section 203 of the COMPANIES ACT, 2013 a company
may appoint or employ a person as its MD, if he is the MD or Manager of one and
not more than one other company with the consent of all directors present at
meeting.
3. Will Provisions of Section- 197 applicable on Private Companies?
Ans. No, the provision of Seciton-197 will not applicable on private companies. For
appointment of managerial personnel private company require to follow section196, but there is no need to follow section-197 for remuneration to managerial
personnel.
4. Will Managerial personnel appointed under section 196, treated as KMP?
Ans. No, Managerial Personnel will not be treated as KMP.
Section: 203 talks about KMP and this section not applicable on Private Companies.
So if a private company appoints any managerial personnel there Is no need to
follow provisions of section-203.
5. If any existing director is interested director in pursuance to appointment of
Managerial Personnel, so can he participate in this resolution?
Ans: No, Existing Director cant participate in this resolution, As per Section-184 of
Companies Act, 2013. Such interested director have to disclose before the meeting
his interest.

CONCLUSION:
As per Companies Act-2013 there is no compulsion to appoint
MD/WTD/MANAGER. But some companies Appoint MD/WTD/MANAGER. So Private
companies can appoint MD/WTD/ Manager as per process given above. In Companies Act2013 process is lengthy but its not as difficult. Its just require assistance of Professionals
like Company Secretary or Charted Accountant. Because there is heavy penalty under
Companies Act-2013. So its my request from all professionals and businessman be careful
while working under companies Act-2013.

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CS Dives Goyal
Practicing Company Secretary, Delhi

Mob: +91- 8130757966


csdiveshgoyal@gmail.com

(Author CS Divesh Goyal, ACS is a Company Secretary in Practice from Delhi and can be contacted at
csdiveshgoyal@gmail.com) Disclaimer: The entire contents of this document have been prepared on the
basis of relevant provisions and as per the information existing at the time of the preparation. Though
utmost efforts has made to provide authentic information, it is suggested that to have better
understanding kindly cross-check the relevant sections, rules under the Companies Act, 2013. The
observations of the author are personal view and the authors do not take responsibility of the same and
this cannot be quoted before any authority without the written consent of the author

Regards,
CS Divesh Goyal
Practicing Company Secretary
+91-8130757966
csdiveshgoyal@gmail.com

SUGGESTIONS, COMMENTS AND QUERIES


SOLICITED.

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CS Dives Goyal
Practicing Company Secretary, Delhi

Mob: +91- 8130757966


csdiveshgoyal@gmail.com

DRAFT ATTACHED FORMATS


1. Notice Calling Board Meeting:
Date of issue of Notice

Name of Director
Address of Director
NOTICE FOR THE MEETING OF THE BOARD OF DIRECTORS OF
Name of Company---------------------- LIMITED
Dear Mr. Name of Director,
Notice is hereby given that a meeting of the Board of Directors of the Company shall
be held as per the following schedule:

Date:
Time:
Venue:

of Meeting
of Meeting
of Meeting

The agenda for the meeting is enclosed.


You are requested to make it convenient to attend the above meeting.
For Name of company LIMITED
__________________________
Name of Director
(DIRECTOR)
DIN: -------------------Add: of Director

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CS Dives Goyal
Practicing Company Secretary, Delhi

Mob: +91- 8130757966


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2. AGENDA OF BOARD MEETING:

AGENDA
AGENDA FOR THE MEETING OF BOARD OF DIRECTORS TO BE HELD ON
------------DAY OF----------MONTH, 2014 AT -------------TIME OF MEETING
AT ADDRESS OF PLACE OF MEETING
1.
2.
3.
4.
5.

To Appoint Chairman of the meeting.


To Grant leave of absence.
To Confirm minutes of the previous Board Meeting.
To ADD MORE AGENDAS ACCORDING TO REQURIEMENT
To give Vote of Thanks.

Signature
Name of Director
(DIRECTOR)
DIN: -------------------Add: of Director

3. ATTENDENCE SHEET OF BOARD MEETING:


DIRECTORS MEETINGS
ATTENDANCE SHEET
ATTENDANCE SHEET OF THE MEETING OF BOARD OF DIRECTORS OF M/S NAME OF
COMPANY LIMITED HELD ON ---------DAY OF------------MONTH OF, 2014 AT
REGISTERED OFFICE OF COMPANY.

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CS Dives Goyal
Practicing Company Secretary, Delhi

NAME

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SIGNATURES

DIRECTORS:
1) Mr. Name of Director
2) Mr. Name of Director
3) Mrs. Name of Director
SPECIAL INVITEE:
4) If any;

4. LEAVE OF ABSENSE:
From:
Mr. Name of director who is on leave
Address of Director.
Date of Leave of Absence before Meeting
The Board of Directors
M/s NAME OF COMPANY LIMITED
ADDRESS OF REGISTERED OFFICE
Subject: Leave of Absence
Dear Sir,
With reference to the board meeting of the company to be held on date of mewing, it is
hereby submitted that due to preoccupations, I am not in a position to attend the same. You
are requested to grant the leave of absence.
Thanking you,

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CS Dives Goyal
Practicing Company Secretary, Delhi

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Name of Director who is on leave


DIN: -----------------Address of Director

5. CONSENT TO ACT AS MD:


CONSENT TO ACT AS MANAGING DIRECTOR

Date:

To,
The Board of Directors,
Name of Company,
Registered office address

Subject: Consent to act as Managing Director U/s 196 of Companies Act, 2013.
Dear Sir,
This is to submit that I, Name of Director (DIN: ______________) S/o Mr. ---------- R/o B---------------------------------, the undersigned, having consented to act as a Managing Director of the
Name of Company pursuant to section 196 of Companies Act, 2013.
You are requested to take on record the same.

Name of Director
DIN: ---------Add: of Director

6. MD AGREEMENT:
AGREEMENT

This agreement made on Date of Agreement, effective from Date of Effectiveness between
Name of Company Limited, a company incorporated under the Companies Act, 1956 and
having its Registered office at --------------------------------------------------------------,
(Hereinafter called the Company) of the one part and Mr. Name of MD (DIN: ------------)

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Practicing Company Secretary, Delhi

Mob: +91- 8130757966


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(Hereinafter called the Managing Director) of the other part, whereby it is agreed as
follows:
1. The Company hereby appoints Mr. ---------------------------- (DIN: -------------) as Managing
Director of the Company and the Managing Director hereby agrees to serve the Company in
such a capacity for a period of five years with effect from ------------------.
Now this present witness and it is hereby agreed by and between the parties thereto as
follows:
2. a) The Managing Director shall exercise and perform such powers and duties as the Board
of Directors of the Company (hereinafter called the Board) shall from time to time
determine, and subject to any directions, and restrictions, time to time given and
imposed by the Board, he shall have the general control, management and
superintendence of the business of the Company with power to appoint and dismiss
employees and to enter into contracts on behalf of the Company in the ordinary course
of business and to do and perform all other acts and things, which in the ordinary course
of business he may consider necessary or proper or in the interest of the Company.
b) Without prejudice to the generality of the power vested in the Managing Director,
Managing Director shall be entitled to exercise the following powers:(i) With Boards approval together with other Director(s) and other personnel
authorized by the Board, to open and operate on any banking or other account
and to draw, make, accept execute, endorse, discount, negotiate, retire, pay,
satisfy and assign cheques, drafts, interest and dividend warrants and other
negotiable or transferable instruments or securities.
(ii) To incur capital expenditure up to sum of Rs.------------ lacs (Rupees --------- Lacs
Only) during any financial year.
(iii) To invest surplus funds of the Company in fixed deposit with the companys
bankers or other securities (liquid funds) provided that such investments in any
one financial year shall not exceed Rs.------------- lacs (Rupees ---------------- Lacs
Only) at any one time.
To engage employees and other servants for the Company at a basic salary not
exceeding Rs.---------------- lacs per month within the budget sanctioned by the
Board.

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Practicing Company Secretary, Delhi

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(iv) To increase the salary or the remuneration of any employee or servant of the
Company whose basic salary does not exceed Rs.--------------- lacs per month.
(v) To institute, prosecute, defend, oppose, appear or appeal to compromise, refer to
arbitration, abandon subject to judgment and execution or become non-suited in
any legal proceedings including trade marks, trade names and trade property and
customs passing off actions and revenue proceedings relating to customs or
excise duties, tax on income, profits and capital and taxation generally or
otherwise as it relates to the Company.
(vi) To give loan to employees other then directors of company of Rs. 1 lacs (Rupees
one lacs only) each and Rs. --------------- lacs (Rupees ------------ Lacs only) in
aggregate.
3. The Managing Director shall throughout the said term devote the whole of his time,
attention and abilities to the business of the Company, and shall obey the orders from time
to time, of the Board and in all respects, confirm to and comply with the directions and
regulations made by the Board, and shall well and faithfully serve the company and use his
utmost endeavors to promote the interest thereof.
4. a) The Company shall pay to the Managing Director during the continuance of this
Agreement in consideration of the performance of his duties.
(i) A salary at the rate of Rs. -------------- lacs (Rupees ------------- Lacs only) per
month w.e.f-------------------, which may be reviewed by the Board.
(ii) Reimbursement of medical and hospitalization expenses of the Managing
Director and his family subject to a ceiling of one month salary in a year.
(iii) Leave Travel Allowance for the Managing Director and his family once in a year in
accordance with the Company policy.
(iv) Bonus for the financial year, at the discretion of the Company, with shareholder
approval.
(v) Reimbursement of expenses incurred by him in Purchase of newspapers,
magazines, books and periodicals in accordance with the Company policy.
(vi) Reimbursement of expenses incurred by him on account of business of the
Company in accordance with the Company policy.
(vi) Reimbursement of any other expenses properly incurred by him in accordance
with the rules and policies of the Company.
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Practicing Company Secretary, Delhi

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(viii) Provision of chauffer driven car for the use on Companys business, meal
Coupons and telephone at residence.
(ix) The Managing Director shall be entitled to such increment from time to
time as the Board may by its discretion determine.
5. This agreement may be terminated by either the Company or the Managing Director at any
time within the five year period, by the giving of 3 months notice in writing.
In witness whereof the parties hereto have set their hands the day, month and year first
above written.
For Name of Company Limited
(Name of Director)
DIRECTOR
DIN: --------Add: -------------------Witness

(Name of MD)
Managing Director
DIN: ----------Add:---------------

7. CONSENT TO ACT AS DIRECTOR- DIR-2


DIR-2
[Pursuant to section 152(5) and rule 8 of Companies (Appointment and Qualification
of Directors) Rules, 2014]
To
Name of Company Limited
Subject: Consent to act as a director
I Name of Director, hereby give my consent to act as director of Name of Director Limited,
pursuant to sub-section (5) of section 152 of the Companies Act, 2013 and certify that I am
not disqualified to become a director under the Companies Act, 2013.
1. Director Identification Number (DIN)
2. Name (in full)
3. Fathers Name (in full)
4. Address

:
:
:
:

5. E-mail id
6. Mobile no.

:
:

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CS Dives Goyal
Practicing Company Secretary, Delhi

Mob: +91- 8130757966


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7. Income-tax PAN
8. Occupation
9. Date of birth
10. Nationality
11. No. of companies in which I am already a
Director and out of such companies the names
of the companies in which I am a Managing
Director, Chief Executive Officer, Whole time
Director, Secretary, Chief Finacial Officer,
Manager.
:
Not Applicable
12. Particulars of membership No. and Certificate
of practice No. if the applicant is a member of
any professional Institute.

:
:
:
:

Not Applicable

Declaration
I declare that I have not been convicted of any offence in connection with the promotion,
formation or management of any company or LLP and have not been found guilty of any
fraud or misfeasance or of any breach of duty to any company under this Act or any
previous company law in the last five years. I further declare that if appointed my total
Directorship in all the companies shall not exceed the prescribed number of companies in
which a person can be appointed as a Director.
Date
Signature:
Place: New Delhi
Designation: Director
DIN:
Attachments:
1. Proof of identity;
2. Proof of residence;

8. BOARD RESOLUTION:
TO REAPPOINTMENT MR. NAME OF DIRECTOR (DIN: ----------) AS MANAGING DIRECTOR
OF THE COMPANY:The Chairperson placed before the Board draft Agreement to be entered with Mr. Date of
Director (DIN: ----------) to re-appoint him as Managing Director of company w.e.f. --------------------------- as per terms and condition mentioned in the draft agreement.
After discussion following resolution passed unanimously:And if any person wanted to suggest me something for my articles please contact to me.

CS Dives Goyal
Practicing Company Secretary, Delhi

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RESOLVED THAT pursuant to the provisions of the of Companies Act, 1956 along with
other applicable provisions, if any of the Companies act 2013, and rule made there under
(including any statutory modification or re-enactment thereof for the time being enforce)
and Article of Association of Company and subject to approval of shareholders in general
meeting, Mr. name of director (DIN: --------------), Managing Director of the Company be and
is hereby Re-appointed as Managing Director of the Company with effect from ------------------------- as per terms and conditions as mentioned in the agreement to be entered with him.
RESOLVED FURTHER THAT Mr. ---------------- (DIN: ------------) and Mrs. ---------------(DIN: ----------), Directors of the Company either jointly or severally be and is hereby
authorized to do all such acts, deeds, things etc. as may be required to comply with all
formalities etc. as may be required to comply with all formalities in this regard.

Suggestions, comments and queries solicited.


(Author CS Divesh Goyal, ACS is a Company Secretary in Practice from Delhi and can be contacted at
csdiveshgoyal@gmail.com) Disclaimer: The entire contents of this document have been prepared on the
basis of relevant provisions and as per the information existing at the time of the preparation. Though
utmost efforts has made to provide authentic information, it is suggested that to have better
understanding kindly cross-check the relevant sections, rules under the Companies Act, 2013. The
observations of the author are personal view and the authors do not take responsibility of the same and
this cannot be quoted before any authority without the
written consent of the author

CS Divesh Goyal
GOYAL DIVESH &
ASSOCIATE
Mob: +91-8130757966

And if any person wanted to suggest me something for my articles please contact to me.