Chapter XIII - Appointment and Remuneration of Managerial Personnel
Section 196
Section 196: appointing a managing director, whole-time director or manager
A company cannot have a managing director and a manager at the same time, or appoint either for more than five years at a time. Appointments need Board approval and approval at the next general meeting.
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This article is for general information. Refer to the Companies Act, 2013 official text for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
(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.
(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;
Provided further that where no such special resolution is passed but votes cast in favour of the motion exceed the votes, if any, cast against the motion and the Central Government is satisfied, on an application made by the Board, that such appointment is most beneficial to the company, the appointment of the person who has attained the age of seventy years may be made. (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 Part I of 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 shall be filed within sixty days of such appointment with the Registrar.
(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.
Introduction
Section 196 sets eligibility, term and approval rules for managing directors, whole-time directors and managers. Appointments are subject to section 197 and Schedule V. Central Government approval is needed only where the appointment departs from the conditions in Part I of Schedule V.
The Companies (Amendment) Act, 2017 added a second route for appointing a person aged seventy or more and limited Central Government approval to departures from Part I of Schedule V. These changes took effect on 12 September 2018.
Key takeaways
Term
Up to five years at a time; re-appointment not earlier than one year before the term ends.
Age and disqualifications
Not below twenty-one or seventy and above (unless approved under the provisos); no undischarged insolvency, composition with creditors, or sentence of more than six months.
Approvals and filing
Board approval, then a resolution at the next general meeting; a return within sixty days.
Check eligibility
A company cannot appoint or employ a managing director and a manager at the same time. It cannot appoint or continue a person who is below twenty-one, or who has attained seventy unless a special resolution is passed with a justification in the explanatory statement. If the special resolution fails but votes in favour exceed votes against, the Central Government may approve on the Board’s application if satisfied that the appointment is most beneficial to the company. The person must not be an undischarged insolvent or ever adjudged insolvent, must not have suspended payments to or compounded with creditors, and must not have been convicted and sentenced for more than six months.
- India Code — consolidated Companies Act, 2013, section 196
- eGazette — MCA notification S.O. 902(E), 26 March 2014 (commencement from 1 April 2014)
- eGazette — Companies (Amendment) Act, 2017 (1 of 2018)
- eGazette — MCA notification S.O. 4823(E), 12 September 2018 (sections 66 to 70 of Act 1 of 2018)
- MCA — Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, as notified by G.S.R. 249(E)
Fix the term
The appointment or re-appointment cannot exceed five years at a time. A re-appointment cannot be made earlier than one year before the current term expires.
Approve the appointment
Subject to section 197 and Schedule V, the Board approves the appointment, terms and remuneration at a meeting. A resolution at the next general meeting must approve it, and the Central Government must approve where the appointment departs from Part I of Schedule V. The notice of the Board or general meeting must include the terms, remuneration and any director’s interest in the appointment.
File the return
A return in the prescribed form must be filed with the Registrar within sixty days of the appointment. Rule 3 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, as first notified, prescribes Form No. MR.1. The rule text cited here is the version first notified in 2014; MCA has amended these Rules since, so confirm the current consolidated rule before relying on any figure or form.
If members do not approve
Under sub-section (5), and subject to the Act, acts done by the appointee before the general meeting declines approval are not invalid.
Practical checklist
Do
- Verify age, insolvency and conviction history before the Board meeting.
- Set out terms, remuneration and directors’ interests in the notice.
- Diary the sixty-day return.
Avoid
- Do not appoint a manager while a managing director is in office.
- Do not re-appoint more than one year before the current term ends.
Illustrative example
Hypothetical: re-appointing a long-serving MD
A managing director’s five-year term ends on 31 March 2028. The Board wants to re-appoint her in September 2026.
Timing
September 2026 is more than one year before expiry, so the re-appointment cannot be made until the final year of the term, not earlier than one year before 31 March 2028.
Approve
The Board approves the re-appointment and remuneration, and the next general meeting approves it.
File
The return is filed with the Registrar within sixty days.
Outcome
- Waiting until the one-year window opens keeps the re-appointment within sub-section (2).
Glossary
- Schedule V
- The Schedule to the Act setting conditions for appointment and remuneration of managerial personnel; Part I contains the appointment conditions.
- Whole-time director
- Under section 2(94), it includes a director in the whole-time employment of the company.
Frequently asked questions
Can a 72-year-old be appointed managing director?
Yes, by a special resolution with justification in the explanatory statement. If the special resolution fails but votes in favour exceed votes against, Central Government approval on the Board’s application is the alternative.
Is Central Government approval always required?
No. It is required where the appointment departs from the conditions in Part I of Schedule V.
What is the maximum term?
Five years at a time, with re-appointment not earlier than one year before the term ends.
Need help applying this provision to your situation?
Contact BizeneedLast updated 11 October 2026