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No company can, appoint or employ, orWhat is the continue the appointment or employment of, any person as its managing or whole time director who-

is an undischarged insolvent, or has at any time been adjudged an insolvent

suspends, or has at any time suspended, payment to his creditors or makes, or has at any time made, a composition with them

is, or has at any time been, convicted by a Court in India of an offence involving moral turpitude.

Every public company or a private company which is a subsidiary of a public company, having a paid up share capital of Rs. 5 crores or more must have a managing director or wholetime director or manager.

Appointment of managing director or wholetime director or manager of a public company or a private company which is a subsidiary of a public company requires the approval of the Central Government unless the appointment is in accordance with the conditions specified in Schedule XIII of the Companies Act, 1956 and a returm in Form 25 C is filed within 30 days of appointment.

Application for approval must be made to the Central Government if Form 25 A within 90 days of appointment. The Central Government shall grant its approval if it is satisfied that :-

the managing director or wholetime director or manager is in its opinion, a fit and proper person

such appointment is not against public interest

the terms and conditions of the appointment are fair and reasonable.

The Central Government may grant approval for a period less that the period for which approval is sought.

In case the approval of the Central Government is refused, the appointed person shall vacate his office on the date of communication of the decision of the Central Government to the company and if he omits to do so, he shall be liable to a fine of Rs. 500/- for each day of default.

The Central Government, on information received by it or suo moto, is of the opinion that such appointment made without approval of the Central Government contravenes the conditions given in Schedule XIII, it may refer the matter to the Company Law Board for decision.

On receipt of the order of the Company Law Board against the company,:-

The company shall be liable to fine of upto Rs. 5000/-

Every officer of the company in default shall be liable to a fine of Rs. 10000/-

The appointment shall be deemed to have come to an end and the appointed person shall in addition to being liable to pay a fine of Rs. 10000/-, refund to the company the entire amount of remuneration received by him from such appointment.


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