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Managing Director (MD) ðŸ‘Ļ‍💞

Definition (Section 2(54)): A Managing Director is a director who, by virtue of an agreement with the company or a resolution, has been entrusted with substantial powers of management.

In Simple Terms: MD = Professional CEO who runs day-to-day operations.

Examples:

  • Mukesh Ambani - MD of Reliance Industries.
  • N. Chandrasekaran - MD of Tata Sons.

Appointment of MD 📝

Requirements:

  1. Must be director first.
  2. Appointed by Board Resolution.
  3. Approved by shareholders (Ordinary Resolution).
  4. Term: Maximum 5 years at a time (can be reappointed).
  5. Written agreement must be entered into.

Disclosure: Copy of agreement must be filed with Registrar of Companies (ROC).

Powers of MD ⚡

Delegated by Board:

  1. Day-to-day Management: Run operations.
  2. Hire/Fire Employees: Below Board level.
  3. Sign Contracts: Within limits set by Board.
  4. Represent Company: In dealings with outsiders.

Cannot Do (Reserved for Board):

  • Issue shares/debentures.
  • Borrow beyond limits.
  • Sell entire business.
  • Change Articles of Association.
MD vs Chairman

Managing Director (MD): Executive role. Runs the company daily. Chairman: Non-executive (usually). Chairs Board meetings.

In India: Often same person is both MD & Chairman (e.g., Mukesh Ambani). Best Practice: Separate (to avoid concentration of power).

Remuneration of MD 💰

  • Governed by Section 197 (11% of profits rule).
  • Requires shareholders' approval.
  • Can include salary, commission, perks, stock options.
  • If company has losses, MD can still be paid as per Schedule V limits.

Removal of MD ðŸšŦ

Can be removed by:

  1. Shareholders: Ordinary Resolution (but requires paying compensation as per contract).
  2. Board: For breach of duty/disqualification (but may face legal dispute).

Important: Cannot be removed easily mid-term without compensation (contractual protection).

MD vs Whole-Time Director vs Manager

PositionMeaning
Managing DirectorDirector + Full-time employee. Highest executive power.
Whole-Time Director (WTD)Director + Full-time employee. But less power than MD.
ManagerNot a director. Just full-time employee with management powers.

Quiz Time! ðŸŽŊ

Test Your Knowledge

Question 1 of 5

1. MD must be appointed for a term not exceeding:

3 years
5 years
7 years
10 years

ðŸ’Ą Final Wisdom: "MD is the captain of the ship. But the Board is the navigator, and shareholders own the ship!" â›ĩ

Next up: Corporate Social Responsibility (CSR) - Giving back to society! ðŸŒą

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