Section 196 of CA 2013 : Section 196: Appointment Of Managing Director, Whole-Time Director Or Manager

Explanation using Example

Example Scenario:

XYZ Pvt. Ltd. is a company that is looking to appoint a new managing director (MD) as the previous MD is retiring. The board of directors has identified Mr. A, who is 72 years old, as the ideal candidate due to his vast experience in the industry.

As per Section 196(1) of the Companies Act, 2013, the company cannot appoint Mr. A as a managing director if they already have a manager employed. Assuming they do not have a manager, they proceed with the appointment.

According to Section 196(3)(a), since Mr. A is over 70 years old, the company must pass a special resolution to justify his appointment. The explanatory statement for the resolution must mention why appointing Mr. A is beneficial for the company.

Furthermore, the board must ensure that Mr. A's appointment does not exceed five years as per Section 196(2). They decide to appoint him for a term of three years initially. The terms of his appointment and remuneration are decided in a board meeting and will be subject to approval at the next general meeting of the company as required by Section 196(4).

Finally, the company will have to file a return with the Registrar within sixty days of the appointment, as mentioned in Section 196(4).