Appointment of managing director, whole-time director or manger in a private company in accordance with the provisions of the Companies Act, 2013 (“Act”):

No private company shall:

(a)              appoint or employ at the same time a managing director and a manager;

(b)              appoint or re-appoint any person as its managing director, whole-time director or manager for a term exceeding five years at a time;

Note: No re-appointment shall be made earlier than one year before the expiry of his term.

(c)               appoint or continue the employment of any person as managing director, whole-time director or manager who: (i) is below the age of twenty-one years or has attained the age of seventy years; (ii) is an un-discharged insolvent or has at any time been adjudged as an insolvent; (iii) has at any time suspended payment to his creditors or makes, or has at any time made, a composition with them; or (iv) has at any time been convicted by a court of an offence and sentenced for a period of more than six months.

Note: The 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.

Pursuant to the publication of the notification dated June 05, 2015 by the ministry of corporate affairs, sub section (4) and (5) of section 196 of the Act shall not apply to private companies.

Accordingly, private companies have been exempted from adhering to the provisions of section 197 and Schedule V of the Act, whereby the terms of appointment, including the remuneration payable and the appointment of a managing director, whole-time director or manager be approved by the board at a meeting which be subject to approval by a resolution at the next general meeting and by the central government where such appointment is at variance to the conditions specified in Schedule V.

Note: Where a public company fails to approve the appointment of a managing director, whole-time director or manager at a general meeting, any act done by such managing director, whole-time director or manager before such approval shall not be deemed to be invalid.

Note: A public company, while appointing a managing director, whole-time director or manager, shall ensure that the notice convening the board or general meeting, for considering such appointment shall include the terms and conditions of such appointment, remuneration payable and such other matters including interest, of a director or directors in such appointments, if any and a return in Form MR 1 shall be filed within sixty days of such appointment with the RoC.

Note: A private company shall, upon appointment of a managing director, whole time director or manager, chief executive officer, company secretary and chief financial officer, file a return of such appointment in Form MR 1, within sixty days of such appointment with the RoC.

Conclusion: The MCA notification dated June 05, 2015 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 provide that a private company shall appoint a managing director, whole time director or manager without complying with the provisions as provided in sub section (4) and (5) of section 196. Accordingly, a private company shall continue to appoint a managing director, whole time director or manager, chief executive officer, company secretary and chief financial officer by approving their appointment in a board meeting and thereafter filing a return of such appointment in Form MR 1 with the RoC, within sixty days of such appointment.