Whole Time Directors

10/10/2022 0 By indiafreenotes

As per Section 2(51) of the Act, 2013, Managing Director and Whole-Time Director are considered as a company’s Key Managerial Personnel. In general terms, a Managing Director is a person who is responsible for administering the daily operations of a company. He is also liable to plan, direct and control the functioning of the company. On the other hand, a Whole-Time Director includes a director who is in the whole-time employment of the company, commits whole of his time and attention to carry on the affairs of the company in question and has a considerable personal interest in the company as his source of income.

Meaning of whole-time director

In the Companies Act, 1956, the terms “Whole-Time Director” and “director in whole-time employment” were used in several sections. As a result, a request was made seeking clarifications as to whether or not the two terms can be regarded as synonyms. This position was clarified by the Department of Company Affairs vide letter no. 2/19/63- PR dated 29.06.1964 which stipulated that the two terms are synonymous and can be used interchangeably.

Furthermore, there was also confusion as to whether a whole-time employee is a Whole-Time Director. The Company Law Board clarified that a whole-time employee appointed as a director of the company is in the position of a Whole-Time Director.

As per Section 2(94) of the Act, 2013, “Whole-Time Director” includes a director in the whole-time employment of the company. This definition is inclusive and refers to a director who has been in employment with the company on a full-time basis and is entitled to receive remuneration.

Position of a Whole-Time Director

A Whole-Time Director occupies a significant position under the Act, 2013.  He is recognised as a Key Managerial Personnel [Section 2(51)] as well as an Officer-in-default [Section 2(60)] for any violation of the provisions of the Act.

Companies are required to appoint a whole-time director

Section 203 of the Companies Act, 2013 read with Rule 8 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 provides that:

  • Every listed company; and
  • Every other public company having a paid-up share capital of rupees 10 crores or more

Shall appoint a Managing Director, or Chief Executive Officer or Manager and in their absence, a Whole-Time Director as a whole-time Key Managerial Personnel.

Appointment of Whole-Time Director

The conditions for the appointment of a Whole-Time Director are similar to that of the Managing Director as provided hereinbefore as the same is governed by Section 196 read with Schedule V of the Companies Act, 2013.

Resignation by Whole-Time Director

As per Section 203(4) of the Companies Act, 2013, such vacancy has to be filled within a period of the next 6 months by means of a board resolution.