Do you wish to appoint one of your directors to be a Managing Director

1. A director to be appointed as a managing director would necessarily have obtained the Director Identification Number (DIN) under Section 153 read with section 154 of the 2013 Act [corresponding to section 266 A of the 1956 act].

2. Convene a Board meeting after giving notice to all the directors of the company as per section 173 of the 2013 Act [corresponding to section 286 of the 1956 Act] and approve the draft agreement or the terms and conditions on which the managing director is proposed to be appointed and the appoint the managing director and fix up the date, time, place and agenda of the general meeting to pass an Ordinary Resolution or a special resolution for the appointment.

3. Beware that every officer of the company whose duty is to give notice of the Board meeting as aforesaid and who fails to do so will be punishable with fine of Rs. 25,000 as per section 173(4) of the 2013 Act [Corresponding to section 286(2) of the 1956 Act which provided for a fine of Rs 1000]. This offence is compoundable by the Regional Director or any officer authorized by the Central Government [Section 441(1) (b) of the 2013 Act which is to be notified (corresponding to section 621 A of the 1956 Act)]

4. Comply with the provisions of section  184 of the 2013 Act [corresponding to sections 297 and 299 of the 1956 Act] regarding disclosure of interest of directors etc., and in the case of public companies  and their subsidiaries and holding companies those of Rule 15(2) of Companies (Meetings of Board and its powers) Rules, 2014 [corresponding to section 300 of the 1956 Act] also regarding abstaining from discussion and voting etc.,

5. Remember that if default is made in complying with the provisions of section 184 of the 2013 act, the punishment is imprisonment for a term upto one year or fine of not less than Rs. 50,000 and not more than Rs.100000 or both under the section 184(4) of the 2013 Act]. As per the sections 299 and 300 of the 1956 Act the punishment was that every director who fails to comply will be punishable with fine upto Rs.50,000.

6. In case of public companies and their subsidiaries, where the proposed managing director is already a managing director in another company, a board resolution will be necessary, of which prior notice should have been given and all the directors present at the meeting should have consented to that resolution which is in the Third provisions of the section 203(3) of the 2013 Act (corresponding to section 316 of the 1956 Act).

7. Issue notices in writing of the general meeting at least twenty-one days before the date of the meeting along with the relevant explanatory statement with respect to section 101 of the 2013 Act (corresponding to section 316 of the  section 171(1) and section 173(2) of the 1956 Act).

8. Hold the general meeting and pass the ordinary resolution for simple majority for appointment with respect of section 114(1) of the 2013 Act (corresponding to section 189(1) of the 1956 act)

9. If the managing  director has attained the age of 70 years then have a appointment approved by passing a special resolution without the approval of the central government. [Section 196(3)(a) provision to the 2013 Act]

10. If a special resolution is to be passed then hold the General Meeting and appoint the managing director by passing a special resolution by three fourths majority corresponding to Section 114
(2) of the 2013 Act [section 189(2) of the 1956 Act]

11. In the case of a public company, the appointment in the Board Meeting and the General Meeting will be effective only on approval of the Central Government if the appointment is not made in accordance with the conditions specified in Schedule 5 of the 2013 Act [corresponding to parts 1,2,and 3 of the Schedule 8 to the 1956 Act).

12. Please keep in mind that clause (e) of part 1 of the schedule 5 of the 2013 Act relating to the managing or whole time director to be resident in India will not apply to the companies in Special Economic Zones as notified by the Department of Commerce from time to time.

13. File  a certified true copy of the resolution of the Board or agreement excluded and the ordinary resolution or special resolution along with the explanatory statement (if Item No. 10 above is applicable) appointing the managing director with the concerned ROC in e-Form No. MGT-14 within thirty days of the passing or making thereof (section 192), after paying the requisite fee given in table of fees annexed to Companies (Registration of office and payment of fees) Rules, 2014.

14. Ensure that the said e-form is filed electronically and the copy of the resolution and the explanatory statement (if it is a special resolution as explained above) are filed with the said e-form as attachments.

15. Ensure that the said e-form digitally signed by the director or manager or secretary of the company or CEO or CFO duly authorized by the Board of Directors.

16. Further ensure that the said e-form is certified by the chartered accountant or a cost accountant or a company secretary in whole time practice by digitally signing the said e-form.

17. Note that if the default is made in complying with the aforesaid requirements, the company will be punishable with the fine which shall not be less than Rs.500000 but which may extend to Rs. 25 lakhs and the every officer of the company who is in default will be punishable with fine which may extend to upto Rs.500000 as per the section 192(5) of the 1956 Act fine was upto Rs. 200 for every day during which the default continues in case of contravention of section 192 (1) of the 1956 Act.

18. See that the managing director files a written consent in with the company to act as  a managing director after appointment if he was not a managing director after appointment if he was not  managing director before such appointment .

19. File e-For m DIR-12 along with Form No.DIR-2 as above with concerned ROC in electronic  mode within thirty days of appointment  (section 170 of the 2013 Act), after paying the requisite fee as prescribed under the companies (Registration offices and Fees) Rules, 2014 (corresponding to Schedule 10 to the 1956 Act), in the manner given in Item No.18.

20. Ensure that the said e-Form is electronically filed with the ROC and is digitally signed by the managing director or director or manager or secretary of the company duly authorized by the Board of Directors.

21. Further ensure that the said e-Form is certified by a chartered accountant or a company secretary in whole time practice by digitally signing the said e-Form.

22. Note that if default is made in complying with the aforesaid requirements, the company and every officer of the company who is i default will be punishable with fine which shall not be less than Rs.50000 but which may extend to Rs. 5 lakhs . As per the 1956 act fine was upto Rs.500 for every day during which the default continues in case of contravention of section 303(1) and in case of contravention of section 307(1) of the 1956 Act with the fine upto Rs. 50,000 and also with a further fine of upto Rs.200 for every day during which the default continues as per section 303(3) read with section 307(8) of the 1956 Act].

23. See that the managing director notifies about his appointment to other companies in which he is a director, managing director, manager or a secretary within thirty days corresponding to section 189(6) of the 2013 Act ( section 305 of the 1956 Act).

24.   If such director does not do so, he will be punishable with fine upto Rs. 25,000 corresponding to section 189(6) of the 2013 Act (Section 305(1) of the 1956 Act which provided for a fine of Rs.1000

25. Make necessary entries in the Registrar of Directors particulars etc., corresponding to the section 170(1) of the 2013 Act (Section 303(1) of the 1956 Act).

26. Note that if default is made in complying with the aforesaid requirements, the company and every officer of the company who is in default will be punishable with fine which shall not be less than Rs. 50,000 but which may extend to Rs.5 lakhs corresponding to section 172 of the Companies Act, 2013. As per the 1956 Act fine was upto Rs. 500 for every day during with the default continues in case of contravention of Section 303(1) and in case of contravention of section 307(1) of the 1956 act with fine upto Rs. 50,000 and also with a further fine of upto Rs.200 for every day during which the default continues as per the section 303(1) read with Section 307(8) of the 1956 Act.

27. Take note of the provisions of section 196, 197 and Schedule 5 of the 2013 Act regarding disqualifications, disabilities etc., a person to be appointed as a managing director.

28. File e-Form No. MR-1 within 60 days of appointment by following the steps given in Item Nos 21 and 22 along with the fees as per the process for payment of fees as mentioned in item No. 21 above. Remember that since e-form MR-1 (Corresponding to e-Form 25 c under the 1956 Act) is a document , any delay in filing the same with the ROC falls within the ambit of section 403 of the 2013 Act and therefore in such cases Roc shall charge additional fee on this form filed belatedly.

29. If your company’s paid-up share capital is rupees ten crores or more , then appointment of either a  managing director or a whole-time director or a manager is a must corresponding to section 203 (1) of the 2013 Act (corresponding to section 269(1) of the 1956 Act).

30. If your company is a Government company then provisions of section 203 of the 2013 Act will not apply to your company.

31. Also known that the offences mentioned i item Nos. 3,17 (offence committed by an officer of the company), 22, 24 and 26 above are compoundable by the Regional Director or any officer authorized by the Central Government corresponding to section 441(1) (b) of the 2013 Act. Offence committed by a company covered under item no 17 will be compoundable by the Tribunal. Item 5 above is compoundable with the permission of the special court.

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