Managing Director

A Managing Director (MD) is a director who, under Section 2(54) of the Companies Act, 2013, is entrusted with substantial powers of management of the company's affairs by its articles, an agreement, a Board resolution, or a resolution passed in general meeting. The MD is the company's chief executive for day-to-day operations and is a Key Managerial Personnel (KMP) under Section 2(51). Powers routinely exercised by the Board without any further sanction do not, by themselves, make a director an MD.

Appointment and tenure

An MD is appointed by the Board and the terms are approved by shareholders, ordinarily at the next general meeting, in line with Sections 196 and 197 read with Schedule V. Where the appointment does not meet Schedule V conditions, Central Government approval is required. Return MR-1 must be filed with the Registrar (MCA) within 60 days of appointment.

• Maximum term is five years at a time; re-appointment cannot be made earlier than one year before expiry of the existing term (Section 196(2)).
• The person must not be below 21 or above 70 years; appointment beyond 70 needs a special resolution (Section 196(3)).
• The individual must not be an undischarged insolvent, must not have suspended payment to creditors, and must not have been convicted and imprisoned for more than six months.

Holding office in more than one company

As a whole-time KMP, an MD generally cannot hold office in more than one company at the same time, except in that company's subsidiary (Section 203(3)). A specific proviso allows a person to serve as MD in one other company if the Board approves it by a resolution passed with the consent of all directors present. In effect, an MD can hold that office in a maximum of two companies.