Appointment of MD who attained the age of 70 year Recent Case Law (URGENT QUERY)

[CS Shilpa Verma]

Dear Member,

 

Our Company's MD  has attained the age of 70 year in 22nd July, 2015 who was appointed as MD on 8th January, 2015 for a period of 5 year and that time our company passed the ordinary resolution in the AGM. 

Please Suggest me can Any Compliance has to be made by the Company or Not?

 

As per Section 196(3)(a)  of CA, 2013 No company shall appoint or continue the employment of any person as managing director who -- 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.

 

I have seen one company case order relating the appointment of MD who has attained the age of 70 year during his tenure. (case Sridhar Sundararajan Vs Ultramarine & Pigments Limited)

 

As per Order

 

Section 196 of CA, 2013 was brought into effect from 1^st April, 2014. The Section can apply to appointment made after 1^st April,2014. It cannot apply retrospectively. 

 

Section 269 of the 1956 read with Schedule XIII 

 

No person shall be eligible for appointment as a managing director of a company unless he satisfies the following conditions, namely

(ii) 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.

 

Clearly, there was no 'discontinuance' of Managing Directorship at the age of 70; the section applied only to his appointment (and that includes his reappointment). Sections 269(2) and 267 of the 1956 Act are now sought to be merged in Section 196(3),

 

The only conclusion that one can draw is that the word 'continue' is correctly used in its strict sense in relation to clauses (b), (c) and (d) of Section 196(3), i.e., as a cessation eo instante on the occurrence of any of the events those sub clauses contemplate, but in the context of Section 196(3)(a), it means, and can only mean 'appointment' and 'reappointment.

 

Correctly read, therefore, Section 196(3) does not operate to interrupt the appointment of any Director made prior to the coming into force of the 2013 Act, even in a case where the Managing Director crosses the age of 70 years during the term of his appointment; and it also does not interrupt the appointment of a Managing Director appointed after 1st April 2014 where at the date of such appointment or reappointment the Managing Director was below the age of 70 years but crossed that age during his tenure.

 

There is no mid tenure cessation of Managing Directorship as a result of Section 196(3)(a). All that Section 196(3)(a) does is to sound a note of caution in the public interest and to demand from the company a special resolution when a person who has already crossed the age of 70 at the date is proposed to be appointed or reappointed.

Regards

CS Shilpa Verma

 

 

[swapnil hasabnis]

Dear Madam,

I am facing the same situation now. Can you help me with procedure? We are planning to conduct a egm for this.

Thank you and Regards

CS Swapnil Hasabnis

[Rinki goyal]

 But for good corporate governance special resolution should be filed in next AGM/EGM after the person turns 70 years of age, showing just continuity of his term of appointment.

Rinki Goyal

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[C K Riju & Co. Company Secretaries]

Dear Sir,

The sections reads as follows "No company shall appoint or continue the employment as MD" if clause (a) sub section (3) of section 196 is attracted. 

Proviso to clause (a) only speaks of appointment!

My understanding is Special resolution is not required for continuation of earlier appointment.

 

With best regards,

 

CS C. K. Riju B.Com., FCS

Company Secretary in Whole Time Practice,

 

C K RIJU & CO.

Company Secretaries

 

No.4N, Prof. Subramani Street,

(Near EGA Theatre),

Kilpauk, Chennai-600010.

 

C:- 96000-64707

E:- rij...@gmail.com

 

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