Appointment
Of Foreign Citizen as Managing Director, Whole-time Director Or Manager
Section 196 of Companies Act, 2016
·
No Company shall appoint or employ at
the same time a managing director, whole-time director and a manager.
·
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
·
No company shall appoint or continue the
employment of any person as managing
director, whole-time director or manager who-
(a) is below the of 21 years or has
attained the age of70 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 of such motion shall indicate the justification of 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 makers, or has at any time made, a composition with them; or
(d) has at any time being convicted by
court of an offence and sentenced for a period of more than six months.
·
Subject to the provision of section 197
and schedule V, a managing director,
whole-time director or manager shall be appointed and the terms and condition
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
of such appointment is at variance to the conditions specified in that schedule:
Provided
that
notice convening board or general meeting for considering such appointment
shall include the terms and condition 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 shall be filled
within sixty days of such appointment with the registrar.
·
Subject to the provision 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.
Rule 3 of Companies (
Appointment & Remuneration of Managerial Personnel) Rules , 2014
A
company shall file a return of appointment of a managing director , whole time
director or manager, chief Executive Officer (CEO), Company Secretary and Chief
Financial Officer (CFO), within 60 days of the appointment, with the registrar
in Form No. MR.1 along with such fee
as prescribed under Companies (Registration Offices and Fees) Rules, 2014.
Part 1 of the Schedule
V to the Companies Act,2013
Apart
from this, Part 1 of the Schedule V contains certain conditions, which must be
satisfied by a person to be eligible for appointment as managing
director/whole-time director/manager without
the approval of Central Government. Part 1 of the Schedule V reads:
No
person shall be eligible for appointment as a managing director or a whole-time
director or a manager (hereinafter referred to as managerial person) of a
company, unless he satisfies a following conditions, namely:
·
He had not been sentenced to
imprisonment for any period, or to a fine exceeding Rs. 1,000, for the
conviction of an offence under any of the following 16 acts, namely Indian
Stamp Act; Central Excise Act; IDRA; Prevention of Food Alteration Act;
Essential Commodities Act; Companies Act; SCRA; Wealth Tax Act; Income Tax Act;
Customs Act; Competition Act; FEMA; SICA; SEBI Act; FT(D & R) Act; and
Prevention of Money Laundering Act, 2002 :
Provided
that where the Central Government has given its approval
to the appointment of a person convicted, no further approval of that person ,
if he had not been convicted subsequent to such approval;
·
He had not been detained for any period
under the conservation of Foreign Exchange and Prevention of Smuggling
Activities, 1974:
Provided
that
where the Central Government has given its approval to the appointment of a
person detained, no further approval of the Central Government shall be
necessary for the subsequent appointment of that person, if he had not been so
detained subsequent to such approval;
·
He has completed the age of 21 years but has not attained the age
of 70 years.
However , a person who has attained the
age of 70 years can be appointed as the managerial person without the approval
of the Central Government; provided his appointment is approved by a special
resolution passed by the company in general meeting;
·
Where he is a managerial person in more
than one company, he draws remuneration from one or both companies, provided
that the total remuneration drawn from the companies does not exceed the higher
maximum limit admissible from any of the companies of which he is a managerial
person;
·
He is resident in India. Here, resident
in India includes a person who has been staying in India for a continuous
period of not less than 12 months immediately preceding the date of his appointment
as a managerial person and who has come to stay in India------
(i)
for taking up employment in India; or
(ii) for carrying on a business or
vocation in India.
It may be noted that this condition shall not apply
to that companies in Special Economic
Zones.
What are the
compliances if in case a Foreign citizen is being appointed as Whole Time
Director?
Central
Government approval is required.
eForm
MR 2 is required to be filed. eForm MR 2 is Form
of application to the Central Government for approval of appointment or
reappointment and remuneration or increase in remuneration or waiver for excess
or over payment to managing director or whole time director or manager and
commission or remuneration to directors
Take
note that application seeking approval shall be made to CG within a period of
Ninety days from the date of such appointment.
It
is mandatory that the foreign Citizen is having valid DIN. The Foreign Citizen
must have valid Passport as Identity Proof.
Meetings
to be held in this compliance;
-
Board Meeting
-
Remuneration & Nomination Committee
Meeting
-
Shareholders Meeting
Apart
from eForm MR 2, eForm MGT 14 is also required to be filed to file the Special
Resolution.
Attachments
to eForm MR 2 in case you are appointing Whole Time Director as a Foreign
Citizen;
-
Certified true
copy of the resolution of Board of directors
-
Copy of the
resolution of nomination and remuneration committee
-
Certified true
copy of resolution of shareholder(s) along with notice
-
Certificate from
the auditor or company secretary
-
Newspaper
clipping in which notices are issued
-
Copy of
employment visa/ passport, in case the proposed appointee is a foreign citizen.
-
Copies of
educational or professional qualification certificate
-
Projections of
the Turnover and net profits for next three years
-
Full and proper
justification in favor of the proposal
Govt fees for filing eForm MR 2 would range from Rs.
2000 to Rs. 20,000 depending upon the Authorised Share capital of the company
For more details, contact CS Neha Seth at 9871903449 or csnehaseth@gmail.com
