Do you guys know that only directors can be managing directors of the company, but any person with the requisite qualification can become a whole-time director of the company? There is always confusion regarding the roles and functions of the Managing Director and Whole-time Director.
Who are Directors?
As the name suggests, directors are the officers of the company who are appointed with an aim of directing and supervising the company’s affairs. According to the Companies Act, the term ‘Director’ refers to the one appointed to the company’s board. Section 149 of the company’s act, says that every company is required to have a board of directors comprised of directors.
Also Read: Difference Between Manager and Director
Here, we present to you the differences between the managing director and whole-time director in this post.
Content: Managing Director Vs Whole Time Director
- Comparison Chart
- Key Differences
- Rules of Appointment
- Term of Office
|Basis for Comparison||Managing Director||Whole-time Director|
|Meaning||A managing director refers to the officer of the company who represents the Board in routine activities.||A whole-time director, who provides his/her full-time services to the company's management.|
|Powers of Management||Possesses substantial powers of management, which are not of routine nature.||Does not possess substantial powers of management.|
|Appointment||Resolution is passed at the board meeting. Consent of the shareholders is not required.||A special resolution is passed at the AGM. Except when the whole time director is appointed as a trustee for debenture holders.|
|Simultaneous Existence with manager||Managing Director cannot exist simultaneously with the manager in any company.||A Whole Time Director can be appointed simultaneously with the managing director and manager.|
|Holding appointments in a number of companies||Can be appointed as managing director in more than one company, but not more than two companies.||Cannot be appointed as a whole-time director in more than one company, as he is the whole time employee of the company.|
Definition of Managing Director
Managing Director (MD) is assigned with significant powers, relating to the management of the company’s affairs. He is subordinate to the company’s board of directors. He/She is typically the chief executive officer of the company.
To become the managing director of the company he has to be a director. To put it simply, only directors can be appointed as managing directors. If someone is to be appointed as a managing director he must be appointed as a director first and then managing director and so he will cease to be the managing director of the company, at the same moment if he ceases to be the director.
Further, the powers entrusted to the MD can be exercised under the supervision, control, and direction of the board.
A managing director has the power to perform administrative functions, of routine nature when the Board authorizes. This does not include:
- Power of affixing company’s common seal in any document.
- Drawing or endorsing cheque on the company’s account
- Drawing or endorsing any negotiable instrument
- Signing any share certificate
- Directing registration of transfer of any share
In a nutshell, a managing director does not have the power to perform administrative functions, except when the Board of Directors authorizes it.
Points to be Noted
- The powers conferred to the managing director can be altered.
- The managing director can be removed from his office, in the same manner in which his appointment was done, regardless of the fact that his appointment was done with the approval of the central government.
- More than one managing director can be there in a company.
- The person who is appointed as an MD, should not be an MD or Manager of more than one other company.
Appointment of Managing Director
An MD is a director as a result of:
- Articles of association of the company
- Agreement with the company
- Resolution passed by the company at AGM
- Resolution passed by the Board of Directors
Also Read: Difference Between COO and CEO
Definition of Whole-time Director
Whole Time Director refers to a director who is in full-time employment with the company, i.e. he/she is the one who gives his whole or significantly whole working time to work for the company. To put simply, a whole-time director is an employee director of the company, who carries out substantial administrative functions.
- The whole-time director is a virtual managing director, though he is not designated.
- When the appointment of a director is made, to work like a technical director, legal director, finance director, or marketing director on a full-time basis.
An executive director of the company is an example of a whole-time director. There are a number of companies in which executive directors do not form part of the Board of Directors. They devote their full time and attention to the enterprise and its business affairs. And because they are already in full-time employment of the company, they cannot join another company as a whole-time director.
But here it is to be noted that they can join another company to hold the office of a non-executive director, provided the overall number of companies as prescribed.
Key Differences Between Managing Director and Whole-time Director
As we have understood the meaning of the two terms, let us understand the difference between managing director and whole-time director:
- A Managing Director is the one who represents the Board in day-to-day management. On the other hand, a Whole-time Director is a director appointed under a special contract of employment as a full-time employee of the company.
- A managing director is an officer of the company who possesses substantial powers of management. As against, a whole-time director is an ordinary officer of the enterprise, who does not possess discretionary power to take policy decisions.
- For the appointment of a managing director, the resolution is passed at the board meeting, and the approval of shareholders is not necessary. As against, for the appointment of whole-time director special resolution is passed at the AGM. Except when the whole time director is appointed as a trustee for debenture holders.
- A company either employs a managing director or manager, at one time, whereas a company can employ a manager and whole-time director, at the same time.
- One person can become a managing director in two companies. As against, one can be in whole-time employment of the company in just one company at a time, so one cannot hold the position of whole-time director in more than one company.
Appointment of Directors
A company shall appoint a managing director and a whole-time director. The board is required to approve such appointments and remuneration payable to the MD and WD. However, if there are any variances as to the conditions mentioned in Schedule V of the Companies Act, the appointment and remuneration payable to them has to be approved by resolution in the succeeding general meeting.
Rules regarding the appointment of directors
- While a public limited company shall have a minimum number of 3 directors whereas a private company can have a minimum number of 2 directors, but in the case of one person company, there is only one director.
- There can be a maximum of 15 directors. However, the appointment of more than 15 directors is also permissible but only after passing a special resolution.
- Every company must contain a minimum of one director who resides in India for a total period of at least 182 days in the immediately preceding year.
- Every publicly listed enterprise is required to have a minimum of one-third of the total number of directors as independent directors.
Term of Office
Appointment or Reappointment of any person as the company’s managing director, whole-time director, or manager for more than five years is prohibited, provided that no reappointment shall be made earlier than one year before his term expires.
When the managing director vacates office as a director, it may lead to the discontinuation of office as a managing director. This means that he can give is resignation as a managing director and still continue as a director of the company but vice versa is not possible.