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The Companies Act, 2013

Chapter XIII - Appointment And Remuneration of Managerial Personnel (196-205)

Section 196- Appointment of managing director, whole-time director or manager.

[Notification Date: 26.03.2014; Effective from: 01.04.2014]

Section 196- Appointment of managing director, whole-time director or manager.[Corresponds to Section 197A, 267, 269, 317, 384, 385, 388 of the Companies Act, 1956]; [Relevant  Rule:3 of The Companies (Appt. and Rem. of Managerial Personnel) Rules, 2014]

(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.


Sub-section (2) shall not apply to a government company - Notification F No 1/2/2014-CL.V dated 05.06.2015.


(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;

(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 offence 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 that Schedule:

Provided that a notice convening 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:

Provided further that a return in the prescribed form - [Rule 3] shall be filed within sixty days of such appointment with the Registrar.


Sub-section (4) shall not apply to the unlisted public company which is licensed to operate by the Reserve Bank of India or the Securities and Exchange Board of  India or the Insurance Regulatory and Development Authority of India from the International Financial Services Centre located in an approved multi services Special Economic Zone set-up under the Special Economic Zones Act, 2005 (28 of 2005) read with the Special Economic Zones Rules, 2006 if the articles of the company provides for the same. -Notification G.S.R. 08(E) dated 04.01.2017]


(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.

Sub-section (4) and (5) shall not apply to a government company - Notification F No 1/2/2014-CL.V dated 05.06.2015.

Sub-section (4) and (5) shall not apply to a private company - Notification F No 1/ 1/2014- CL.V dated 05.06.2015.