Resolution to Appoint Managing Director without Remuneration

The Board of Directors, if so decided, after consultation with the Managing Director and if he so consents, can appoint or reappoint him without any remuneration to be paid him. The Companies Act does not prohibit such appointments.

This is generally done keeping in mind the interest of the company, mostly in cases where the companies are facing loses or low profits. The company will have to take the approval of the shareholders by passing an Ordinary Resolution in a general meeting of the members of the company.

Following templates of such resolutions and explanatory statement thereto can be used.

NOTE: The resolution sample(s) here is only for reference, to help you with drafting. Do refer the exact provisions of the Act, relevant rules framed thereunder and any other applicable laws to be able to not to miss out anything important while drafting.

SAMPLE #1

#. Re-Appointment of Ms. / Mr. ...... ............... (DIN: ..................) as a Managing Director

To consider and if thought fit, to pass with or without modification(s), the following resolution as an Ordinary Resolution:

“RESOLVED THAT in accordance with the provisions of Sections 196, 197 and any other applicable provisions of the Companies Act, 2013 read with provisions of Schedule V of the Companies Act, 2013, the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 and subject to such other approvals, as may be required, the consent of the members of the Company be and is hereby accorded for the re-appointment of Mr. / Ms. ............ ................... (DIN: ...........) as Managing Director of the Company without any remuneration for a further period of five years with effect from (date), on such terms and conditions as set out in the foregoing resolution and the explanatory statement annexed hereto.”

“RESOLVED FURTHER THAT Mr. / Ms. (Name of the Managing Director) shall have the right to manage the day-to-day business affairs of the Company subject to the superintendence, guidance, control and direction of the Board of Directors of the Company and shall have the right to exercise such powers of Management of the Company, from time to time, as may be delegated to her/him by the Board of Directors.”

EXPLANATORY STATEMENT

The following Explanatory Statement, as required under Section 102 of the Companies Act, 2013 set out all material facts relating to the business at Items No. ... of the accompanying notice dated ............ :

Item No. ... :

The Shareholders of the Company, at its ..th Annual General Meeting held on (Date), had approved the appointment of Mr. / Ms/ (Name) as Managing Director of the Company for a period of 5 years with effect from (Date) till (Date), not liable to retire by rotation, without any remuneration in compliance with the provisions of the Companies Act, 2013 and rules made thereunder.

The Board of Directors of the Company, at its meeting held on (Date), based on the recommendation of Nomination and Remuneration Committee, have reappointed, subject to the shareholders approval, Mr. / Ms. ..................., as Managing Director of the Company for a period of 5 years w.e.f. (Date), not liable to retire by rotation.

The terms and conditions of his re-appointment and remuneration are set out in the Resolution proposed to be passed, including the following:

 (a) The term of Managing Director’s re-appointment is for a period of 5 years with effect from (Date) till (Date). He/She shall not liable to retire by rotation.

 (b) The re-appointment of the Managing Director shall be without remuneration. Further, no sitting fee shall be payable to the Managing Director during his tenure for attending any meeting of the Board or a Committee thereof.

 (c) The Managing Director shall be reimbursed for all the expenses incurred by him/her for travelling, boarding and lodging during his/her business trips conducted on behalf of the Company. These reimbursement of expenses will not be included in the calculation of the remuneration of the Managing Director.

 (d) The Managing Director shall adhere to various policies, code of conduct, staff rules of the Company as may be applicable by virtue of his office for the purpose of discharging his official duties/powers as delegated by the Board from time to time.

The above may be treated as a written memorandum setting out the terms of re-appointment of Mr. / Ms. .................. under Section 190 of the Companies Act, 2013.

Brief profile covering the details of his qualification, experience etc as required pursuant to Secretarial Standards on General Meeting, is annexed to this Notice. The Board believes that the re-appointment of Managing Director shall be greatly beneficial, especially in the operations of the Company.

In compliance with the provisions of Sections 196, 197, 203, read with Schedule V of the Companies Act, 2013, the terms and conditions of re-appointment and remuneration specified in the resolution are now being placed before the Members in General Meeting for your approval.

Ms. / Mr. (Name of the Managing Director) holds ........... Equity Shares of the face value of Rs. .../- each in the Company, which amounts to ...% of the total number of equity shares of the company.

His ...years of rich experience in the ................. industry. He could play a key role in turning around and growth of the Company in the coming period. During his association with the Company in the last ...years, his dedication towards work and the Company, and his developmental plans have paved the way for the Company towards a growth path.

Except Mr./Ms. (Name of the Managing Director), being an appointee, none of the Directors and Key Managerial Personnel of the Company and their relatives is concerned or interested, financially or otherwise, in the resolution set out at Item No. ...

The Board commends the Ordinary Resolution set out at Item No. .. for the approval of Members.

.....................................................

SAMPLE #2

#. Re-Appointment of Ms. / Mr. ...... ............... (DIN: ..................) as a Managing Director

To consider, and if thought fit, to pass, with or without modification(s), the following resolution as an Ordinary Resolution:

“RESOLVED THAT pursuant to the provisions of Sections 196, 197, 203 and other applicable provisions, if any, of the Companies Act, 2013 read with Schedule V to the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, including any amendments thereto or re-enactments thereof, from time to time, and subject to such other approvals, permissions and sanctions, as may be required, the Company hereby approves the reappointment of Mr. / Ms. ..... ............... (DIN: ...................), as the Managing Director of the Company, on terms and conditions and remuneration as stated below:

Terms and Conditions of Re-appointment:

 (i) Term of re-appointment: Five years w.e.f. (Date)

 (ii) Remuneration: NIL

 (iii) The Managing Director shall be reimbursed all expenses made by him/her on behalf of the Company and/or incurred by him during the business trips taken by him/her for the Company purposes. Such expenses are to be incurred and reimbursed in line with the policies of the Company.

 (iv) The Managing Director shall have the right to manage the day-to-day business and affairs of the Company subject to the superintendence, guidance, control and direction of the Board of Directors of the Company. The Managing Director shall adhere to the Company’s Code of Conduct for Directors and Senior Management Personnel.

 (v) The Managing Director shall act in accordance with the Articles of Association of the Company and shall abide by the provisions contained in Section 166 of the Act with regard to duties of Directors.

“RESOLVED FURTHER THAT for the purpose of giving effect to this resolution and for removal of any doubts or difficulties, the Board be and is hereby authorised to do all such acts, deeds, matters and things as the Board in its absolute discretion may think fit.”

EXPLANATORY STATEMENT

Item No. ...

The Board of Directors of the Company in its meeting held on (Date) extended the term of appointment of Mr. / Ms. ............................. as the Managing Director of the Company without remuneration for a period of 5 years from (date) to (date) as recommended by the Nomination and Remuneration Committee.

Mr. / Ms. (Name of the Managing Director) satisfies all the conditions set out in Part-I of Schedule V of the Act and also conditions set out under Section 196(3) of the Act for being eligible for his reappointment. He is not disqualified from being appointed as Directors in terms of Section 164 of the Act. He has given his consent in writing for the said re-appointment.

The particulars of the terms of re-appointment of and remuneration payable to Mr. / Ms. ..................... are set out in the resolutions at Item No. .... of this Notice. The same may be treated as a written memorandum setting out the terms of re-appointment of Mr. / Ms. .................. under Section 190 of the Act.

Brief profile of Mr./Ms. ........... .............  is annexed to this Notice (at page no. ...):

Ms. / Mr. (Name of the Managing Director) currently holds ........... Equity Shares of the face value of Rs. .../- each in the Company, which amounts to ...% of the total number of equity shares of the company.

(Name of the Managing Director) has over ...years of experience in the ............ industry. His valuable contribution to the Company during the last ...years of association with the Company, has greatly helped the Company to grow manifold. It would be in the interest of the Company to continue to avail of his rich expertise and hence, to re-appoint him/her as the Managing Director of the Company.

None of the Directors, Key Managerial Persons of the Company and / or their relatives are concerned or interested, financially or otherwise, in the said resolution except Mr./Ms. (Name of the Managing Director).

The Board commends the Ordinary Resolution set out at Item No. .. for the approval of Members.