Section 196 of the Companies Act, 2013
Here is a detailed explanation of Section 196 of the Companies Act, 2013:
📘 Section 196 – Appointment of Managing Director, Whole-Time Director or Manager
Section 196 lays down the rules and conditions for the appointment of key managerial personnel such as:
Managing Director (MD),
Whole-Time Director (WTD), and
Manager of a company.
🔍 Key Provisions of Section 196
1. 🏢 Who Can Appoint?
The Board of Directors, with approval of shareholders by a resolution, can appoint:
Managing Director (MD),
Whole-Time Director (WTD),
Manager.
For listed companies and some public companies, approval from the Central Government is required if the conditions under Schedule V are not met.
2. 📅 Term of Appointment
Maximum tenure is 5 years at a time.
Re-appointment can be made not earlier than 1 year before the expiry of the current term.
3. 🚫 Disqualifications (Cannot Be Appointed If):
A person shall not be appointed or continue as MD, WTD, or Manager if:
| Disqualification | Explanation |
|---|---|
| < 21 or > 70 years | Unless special resolution passed for above 70 |
| Undischarged insolvent | Declared insolvent and not discharged |
| Suspended payment to creditors | Or has made composition with them |
| Convicted | Of any offence and sentenced >6 months (within 5 years of release) |
4. 🗳️ Mode of Appointment
Requires Board resolution and approval by shareholders at the general meeting.
In some cases, Central Government approval is required if conditions of Schedule V are not fulfilled.
5. ⚖️ No Dual Positions in Same Company
A company cannot appoint or employ both a Managing Director and a Manager at the same time.
📝 Additional Points
The terms and conditions of appointment, including remuneration, must be in accordance with Schedule V.
Form MR-1 is to be filed with the Registrar of Companies (ROC) within 60 days of such appointment.
✅ Summary Table
| Parameter | Rule |
|---|---|
| Tenure | Max 5 years |
| Reappointment | Not earlier than 1 year before current term ends |
| Age Limit | 21–70 years (above 70 with special resolution) |
| Disqualifications | Insolvency, creditor default, conviction, age |
| Approval Required | Board + Shareholders (+ Central Govt. if needed) |
| Dual Role Prohibited | No MD and Manager together |
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