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APPOINTMENT

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16 views3 pages

APPOINTMENT

Uploaded by

Keerthana
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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4 Appointment and Remuneration of Key Managerial Personnel

(b) the remuneration or commission drawn by the individual


concerned in any other capacity;
(c) the remuneration or commission drawn by him from any other
company;
(d) professional qualifications and experience of the individual
concerned;
(e) such other matters as may be prescribed.
As per Rule 6 for the purposes of item (e) of section 200, the Central
Government or the company shall have regard to the following matters
while granting approval to the appointment of managing director
under section 196:
(1) Financial and operating performance of the company during
the three preceding financial years.
(2) Relationship between remuneration and performance.
(3) The principle of proportionality of remuneration within the
company, ideally by a rating methodology which compares
the remuneration of directors to that of other executive
directors on the board and employees or executives of the
company.
(4) Whether remuneration policy for directors differs from
remuneration policy for other employees and if so, an
explanation for the difference.
(5) The securities held by the director, including options and details
of the shares pledged as at the end of the preceding financial
year.
Disqualifications
Section 196(3) of the Act makes a specific prohibitory provision
with regard to the appointment of managing director, whole time
director or manager. The section lays down that no company shall
appoint or continue the employment of any person as its 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
Appointment and Remuneration of Key Managerial Personnel 5

for such motion shall indicate the justification for appointing


such person;
(b) is an undischarged insolvent or has at anytime 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.
Apart from this, Part I of Schedule V contains five conditions which
must be satisfied by a person to be eligible for appointment as managing
director, whole-time director or manager without the approval of the
Central Government. These conditions are as below:
(a) he had not been sentenced to imprisonment for any period, or
to a fine exceeding one thousand rupees, for the conviction of
an offence under any of the following Acts, namely:-
(i) the Indian Stamp Act, 1899,
(ii) the Central Excise Act, 1944,
(iii) the Industries (Development and Regulation) Act, 1951,
(iv) the Prevention of Food Adulteration Act, 1954 ,
(v) the Essential Commodities Act, 1955,
(vi) the Companies Act, 2013,
(vii) the Securities Contracts (Regulation) Act, 1956,
(viii) the Wealth-tax Act, 1957,
(ix) the Income-tax Act, 1961,
(x) the Customs Act, 1962,
(xi) the Competition Act, 2002,
(xii) the Foreign Exchange Management Act, 1999,
(xiii) the Sick Industrial Companies (Special Provisions) Act,
1985,
(xiv) the Securities and Exchange Board of India Act, 1992,
(xv) the Foreign Trade (Development and Regulation) Act, 1992;
(xvi) the Prevention of Money Laundering Act, 2002;
6 Appointment and Remuneration of Key Managerial Personnel

(b) he had not been detained for any period under the Conservation
of Foreign Exchange and Prevention of Smuggling Activities
Act, 1974;
Provided that where the Central Government has given its
approval to the appointment of a person convicted or detained
under sub-paragraph (a) or sub-paragraph (b), as the case may
be, no further approval of the Central Government shall be
necessary for the subsequent appointment of that person if he
had not been so convicted or detained subsequent to such
approval;
(c) he has completed the age of 21 years and has not attained the
age of 70 years:
Provided that where he has attained the age of 70 years; and
where his appointment is approved by a special resolution passed
by the company in general meeting, no further approval of the
Central Government shall be necessary for such appointment;
(d) where he is a managerial person in more than one company,
he draws remuneration from one or more companies subject
to the ceiling provided in section V of Part II;
(e) he is resident in India.
Explanation : For the purpose of above, resident in India includes
a person who has been staying in India for a continuous period
of not less than twelve 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.
But this condition shall not be applicable to the companies in
Special Economic Zones, as may be notified by Department of
Commerce from time to time.
However, a person, being a non-resident in India, shall enter
India only after obtaining a proper Employment Visa from the
concerned Indian mission abroad. For this purpose, such person
shall be required to furnish, alongwith the visa application form,
profile of the company, the principal employer and the terms
and conditions of such person’s appointment.
Reappointment of Managing Director
Under sections 196 and 203 of the Companies Act, 2013,
appointment includes reappointment. Reappointment of a managing

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