Definition: The Companies Act, has defined a Managing Director as “A Director who by virtue of an agreement with the company or of a resolution passed by a company in the general meeting or by its Board of Directors or by virtue of its Memorandum or Articles of Association, is entrusted with substantial powers of management of the company”.
Disqualification:
- Any person less than 21 years of age and more than 70 years of age.
- A person who is an undischarged insolvent person or has at any time been adjudged as an insolvent.
- A person who has suspended payment to his creditors or made a composition with them.
- A person who is, or has been convicted by a court of an offense with a sentence of more than 6 months period.
Appointment:
A Managing Director may be appointed by any one of the following ways:
- by an agreement with a company.
- by the resolution passed at the general meeting.
- by the Board of Directors.
Term of office:
The term of office of the Managing Director cannot exceed 5 years at a time, but he can be reappointed as such for a further period of five years.
The number of Managing Directorship:
A Managing Director can not act as such for more than two companies at the same time.
Remuneration:
The remuneration paid to the Managing Director is subject to the maximum limit of 5% of the net profit of a company or a monthly salary. If a company has more than one Managing Director then total remuneration paid to them (all) shall not exceed 10% of the net profit.
Powers of a Managing Director:
- To act as a link between the Board of Directors and the managerial staff.
- To look after the management and administration of a company.
- To appoint the company employees.
- To participate in policymaking as well as policy execution.
- To sign contracts on behalf of a company.
- To decide about the investment of funds of a company.
- To receive remuneration from a company.
Duties of a Managing Director:
- To act on behalf (agent) of the Board of Directors.
- To implement the decision of the Board.
- To supervise, direct, control, and guide the day-to-day affairs of the business.
- To guide the senior executives in their administrative work.
- To report to the Board about programmes made or any problem faced by a company.
- To chair the Board meetings and general meetings, if necessary.
- To manage routine work of a company.
- To sign all the contracts and documents on behalf of the company.
