Section 196 of the Companies Act, 2013

Section 196 of the Companies Act, 2013 (With amendments)

Following is the Section 196 of the Companies Act, 2013 with the amendments as per the Companies (Amendment) Act,2017. Section 196 of the Companies Act, 2013 will be applicable from the 12th September 2018. A notification is issued regarding the enforcement of the section on 12the September 2018. This section talks about the Appointment of managing director, whole-time director or manager. This section can also be called Section 66 of the Companies (Amendment) Act, 2017.

Appointment of managing director, whole-time director or manager.

(1) No company shall appoint or employ at the same time a managing director and a manager.

(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:
Provided that no re-appointment shall be made earlier than one year before the expiry of his term.

(3) No company shall appoint or continue the employment of any person as managing director, whole-time director or manager who —

(a) is below the age of twenty-one years or has attained the age of seventy years:

Provided that appointment of a person who has attained the age of seventy years may be made by passing a special resolution in which case the explanatory statement annexed to the notice for such motion shall indicate the justification for appointing such person;

Provided further that where no such special resolution is passed but votes cast in favour of the motion exceed the votes, if any, cast against the motion and the Central Government is satisfied, on an application made by the Board, that such appointment is most beneficial to the company, the appointment of the person who has attained the age of seventy years may be made. [As Per Companies (Amendment) Act,2017]

(b) is an undischarged insolvent or has at any time been adjudged as an insolvent;

(c) has at any time suspended payment to his creditors or makes, or has at any time made, a composition with them; or

(d) has at any time been convicted by a court of an offense and sentenced for a period of more than six months.

(4) Subject to the provisions of section 197 and Schedule V, a managing director, whole-time director or manager shall be appointed and the terms and conditions of such appointment and remuneration payable be approved by the Board of Directors at a meeting which shall be subject to approval by a resolution at the next general meeting of the company and by the Central Government in case such appointment is at variance to the conditions specified in Part I of that Schedule [As Per Companies (Amendment) Act,2017]:

Provided that a notice convening Board or general meeting for considering such appointment shall include the terms and conditions of such appointment, the remuneration payable and such other matters including interest, of a director or directors in such appointments if any:

Provided further that a return in the prescribed form shall be filed within sixty days of such appointment with the Registrar.

(5) Subject to the provisions of this Act, where an appointment of a managing director, whole-time director or manager is not approved by the company at a general meeting, any act done by him before such approval shall not be deemed to be invalid.