Yes, a managing director can be removed from his post and yet continue to be a director. This is so because the Managing Director of a company is also a director who has been given substantial powers of management through the Articles of Association or agreement or resolution in general meeting or by board of directors. Therefore, even if the powers given to the Managing Director are withdrawn he would still be a director but not a managing director.
Section 167 of the Companies Act, 2013 provides certain grounds on which a person can be disqualified from being a Managing Director. Primarily, the Act restricts a person with unsound mind or an undischarged insolvent or a criminal offender to undertake the responsibility of Managing Director. There are other points listed under Section 167 with the option available to private companies to include any other ground for disqualification in the Articles of Association.
Yes. A Managing Director can be removed from his post and continue to operate as director.
There are no such specific grounds given in the recently legislated Companies Act 2013 on which a Managing Director can be removed. Therefore the decision of removing the Managing Director depends on the shareholders. To remove a director, a company has to pass an ordinary resolution to that effect in a general meeting where the director has the right to be heard before his removal. The director must also be given a notice 14 days prior to his removal.
The Companies Act 2013, has provided some grounds for disqualification for appointment to the post of a Managing Director. Some of these disqualifications are that
• The Managing Director must not be an un discharged insolvent or that anytime adjudged insolvent
• He should not have suspended payment to his creditors
• Should not have been convicted for a offence involving moral turpitude by an Indian court of law.
A Managing Director has to be a Director of the company prior to his appointment. He is both an employee and director of the company. He is not only a servant but also has powers of agent of the company. A Managing Director may submit his resignation and still continue to operate as director till the company accepts the resignation. However the new companies act has made the resignation an unilateral process and it is complete when notice of resignation is received by the company.
To conclude the process of removal of directors is technical and best understood by a reading of section 169 of the Companies Act 2013. In case of Managing Director continuing to act as director even after removal, the position is not very clear as the new act has modified the previous existing position and there has not been case law yet to establish the new position very clearly.
Section 169 and chapter VII of the Companies Act, 2013
Section 115 of the Companies Act, 2013
Employees State Insurance Corpn. v. Appex Engineering P. Ltd., (1998) 1 Comp LJ 10: [19981 1 LLJ 274 (SC)
Happy Home Builders (Karnataka) P. Lid. v. Delite Enterprises, (1994) 13 Corpt LA 405 (Kar).
Achutha Pai v. ROC, (1966) 36 Com Cases 598 (Ker)
Section 168 (1) and (2) of the Companies Act 2013