APPOINTMENT OF MANAGING DIRECTOR, WHOLE-TIME DIRECTOR OR MANAGER [SECTION 196]

Section 196 of the Act contains the provisions for appointment of a managing director, whole-time director or manager. According to this section:

1. Appointment [Section 196(1)]: 

A company shall appoint or employ managing director, whole time director or manager. But a company shall not appoint or employ a managing director and a manager at the same time. In other words, no company is permitted to appoint a manager if a managing director is already appointed and vice-versa. However, there can be both MD and whole-time director in a company.  

Tenure [section 196(2)]:

No company shall appoint or re-appoint any person as its managing director, whole time director or manager for a term exceeding five years at a time. 

Itis further provided that no re-appointment shall be made earlier than one year before the expiry of his term. 

Eligibility Conditions for Appointment: 

For appointing a person as a managing director, whole-time director or manager, firstly he shall not be disqualified for appointment as a director under section 164. 

As per section 196(3), no company shall appoint or continue the employment of any person as managing director, whole-time director or manager who-

1. is below the age of 21 years or has attained the age of 70 years. 
2. is an undischarged insolvent or has at any time been adjudged as an insolvent; or 
3. has at any time suspended payment to his creditors or makes, or has at any time made, a composition with them; or 
4. has at any time been convicted by a court of an offence and sentenced for a period of more than six months.
5. Additional eligibility conditions for appointment as per Schedule V: Part | of Schedule V' to the Companies Act, 2013, has prescribed additional eligibility conditions for appointment as managing director or whole-time director or a manager without seeking approval from the Central Government. They are stated as under:      

• he had not been sentenced to imprisonment for any period, or to a fine exceeding one thousand rupees, for the conviction of an offence under 19 Acts ? as specified under Part | of Schedule V.
• he had not been detained for any period under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974 (COFEPOSA). 
• he has completed the age of twenty-one years and has not attained the age of seventy years.  
• he is resident of India. 

Procedure of Appointment [Section 196(4)]: