We know that the term ‘managing director’ is used side by side with the term ‘wholetime director’ in several Sections of the Act and most of the provisions apply to both of them equally. Obviously, this may pose a question to the mind of a careful reader as to whether these two terms—’managing director’ and ‘whole-time director—denote the same business executive under two different names or whether they denote two altogether different personalities in a company ?
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We have already seen the definition of the term ‘managing director.’ It is surprising that the Companies Act does not define the term ‘whole time director.’ Presumably this term is used in the Act to denote such a director who is in the whole time employment of a company and is not entrusted with substantial powers of management. Thus, if a director is appointed as the ‘Controller of Finance and Accounts of the company, he becomes a wholetime director. He is now generally known as “executive director”.
A close study of the definitions and of the legal provisions relating to the status and powers etc., of managing or wholetime director reveals that they are not exactly the same. They differ from each other in this following respects:
(1) A managing director is entrusted with substantial powers of management [Sec. 2(26)] whereas a wholetime director is just an ordinary employee of the company having no discretionary power to take decisions on policy matters regarding pricing of products, rate of allowable trade discount, buying and selling policy, etc.
(2) The appointment of a managing director does not require the consent of the shareholders but for the appointment of a wholetime director the sanction of the shareholders, by means of a special resolution, is necessary except when he is appointed in the capacity of trustee for debenture holders or manager (Sec. 314).
(3) A managing director and a manager cannot exist simultaneously in any company (Sec. 197-A), whereas a wholetime director may be appointed along with a managing director or a manager.
(4) A managing director can be a managing director of more than one company (Sec. 316) but a whole time director, being a wholetime employee of the company, cannot be a wholetime director in more than one company,
(5) A managing director of a public company or a subsidiary thereof can be appointed for a maximum period of five years at a time (Sec. 317), whereas there is no such restriction regarding the term of appointment of a wholetime director.
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It may, thus, be observed that the two offices, namely, that of a managing director and a whole time director denote altogether different positions in a company with marked difference in the magnitude and extent of powers and responsibilities.