Meaning of the term ‘Manager’

Section 2(53) of the 2013 Act was explained the roles and responsibilities of the manager and it is reproduce section 2(24)of the(old)Companies Act, 1956.Three conditions are to be satisfied before a person may become a ‘manager‘ under section 2(24) of the 1956 Act. They are,

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  • he must be an individual as opposed to a firm or a body corporate or an association,
  • he must have the management of the whole or substantially the whole of the affairs of the company and,
  • he must be subject to the superintendence, control and direction of the Board of directors.

The definition of the word ‘Manager’ given in section 2(24) of the 1956 Act is very wide, and whatever be the nomenclature employed by the parties, if large powers of management of substantially the whole business of the company are vested in a person, then that person becomes the manager. It was held that a person who is not in charge of entire business of the company cannot be deemed to be the manager of the company. A person entrusted with the business of the branch is not a manager but merely an agent whose duties are confined with certain prescribed limits and he cannot have any control over the affairs of the company as a whole. Also, it was held that where the articles provide that a manager may be appointed and may be given the ordinary powers of a manager, it is reasonable to infer that a person allowed to act as manager was given such powers.

Only one Manager

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It may be noted that a company can have only one manager under the 1956 Act(the position is the same under the 2013 Act), through it may have more than one managing or whole time director. Unlike a managing director who is entrusted with only substantial powers of management or himself under the Act has the management of the whole or substantially the whole of the affairs of the company. It therefore follows that only one incumbent can have management of the whole or substantially the whole of the affairs of the company; If there are more than one such person, neither can have the management of the whole or substantially the whole of the affairs of the company.

President -when not Manager

However, where the president reports to the managing director and is not subject to the superintendence, control and direction of the Board of the directors, in view of section 2(24) of the 1956 Act(now section 2(53) of the  2013 Act) which says that a managing director  in order to be a manager has to be subject to the superintendence, control and direction of the Board, there seems to be an escape route. However, a chief executive officer or president, reporting directly to the Board, and  in charge of whole or substantially the whole of the affairs of the company, may well be construed as the ‘manager‘.

Body corporate cannot be manager

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Under section 384 of the 1956 Act, a firm, a body corporate or an association cannot be appointed as a manager. It was held that where substantially the whole of the business of the company has been made over to a financing company, the financing company could not be regarded as a manager since it did not function subject to the superintendence, control and direction of the Board of the financed company and therefore there was no violation of section 384. Section 196 of the 2013 Act dealing with appointment of managing director and whole time director does not specifically provide that no body corporate or firm could be appointed as such. However, from the wording of section 2(53) of the 2013 Act, it is apparent that only an individual could be appointed as managing director or whole time director.

Shop manager is not manager under the Act

The person prosecuted under the Fire Precautions Act, 1971 was the assistant general manager of the book shop. His primary duty was to be the chief buyer and he had been given no managerial training and none in matters of health, safely or fire precautions. He was in charge of the shop while the general manager was away on holiday when an inspector found serious breaches of the fire certificate. He was charged on the basis that he was a managing director. It was held that the intended scope of the Act to fix with criminal liability only those who were in a position of real authority and who were responsible for putting proper procedures in place, namely the decision makers within the company who had both the power and responsibility to decide corporate policy and strategy, and since the person charged was only responsible for day to day running of the bookshop rather than enjoying any sort of governing rule relating to the affairs of the company, the defense that he was not manager would have succeeded if raised at the trial. The conviction was accordingly quashed.

Factory manager is not manager under the Act – Department’s view

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Factory manager in charge of production not concerned with the buying of raw materials or the selling of finished products and not having the control over the company’s finances, would not be manager within the meaning of section 2(24).

Site manager

The site manager of a company as held to be not a manager for the purposes of the Control of pollution Act, 1974(English). The person who only be liable under the Act if it could be shown that he was a decision maker within the company having both the powers and responsibility to design corporate strategy and policy.

Manager and  Managing Director

As regards the position of managers who is also director and that of a managing director, through the officers are seemingly indistinguishable, there is a difference due to the mode of appointment of each. Whereas in the case of the manager who is also appointed director, if for any reason his office of director is vacated, the office of the manager held by him is not affected; in the case of a managing director , if he ceases to be director for any reason whatever, the office of ‘managing director’ also will cease along with it. The very definition of managing director which begins by saying that a ‘managing director is a director’ shows that a person cannot be managing director without being director. But  can continue to be manager whether or not he holds the office of director also. The subtle distinction managers will be of no practical significance in most cases, as a manager who is also a director is, as regards his functions, in no way different from a managing director. Further, where a managing director is a whole time director also, there is no difference between a whole time director and the managing director, except that as per section 316 of the 1956 Act (now section 203 of the 2013 Act), a managing director of one more company, while a whole-time director, being a whole time employee, cannot be whole-time director, being whole-time employee, cannot be whole-time director in more than one company.

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A further distinction between the  ‘managers’ and ‘managing director’ is that while a manager by virtue of his office has the management of the whole or substantially the whole of the affairs of the company, a manager has to be entitled with such powers of the management, as may be thought fit, for a managing director or any other director has, as director, no powers of management except when acting as one of the Board; and if he is to have any power, it will have to be delegated to him or conferred on by him by the memorandum or articles or by an agreement or resolution of the Board or by the company in general meeting. As per section 196(1) of the 2013 Act, there cannot be both the managers and managing director at the same time in a company.

Management of the whole and substantially whole

The Supreme court was laid down that what matters is not that a person is described as a manager but whether he is exercising substantial powers of management. Thus it is not necessary that a he should be in the employment of the company because an employee may not be a manager and he need not to be an employee. There is common feature between  managers and a managing director that both enjoy substantial powers of management but the source from which this power arises is somewhat different. In the case of manager his power is natural and arises from the fact of his appointment but in case of managing director it has to be specifically entrusted to him by the Board of Directors or by the company. Thus, where the Board of directors told the managing director that he should confine himself to managing, that affairs of a single subsidiary, this was held to be the direction binding on the managing, do not include the power to purchase the liability of the third person, and still less that of the company‘s own manager or his partner in a private transaction of his own. It was held that where substantially the whole of the business of a company had been made over to be a financing company, such company could not be regarded as a manager since it did not function subject to the superintendence, control and direction of the Board of the borrowing company. A person in charge of a branch of the business registration and not the entire business is not himself.

Representative Capacity of Manager, Managing Director

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When the interests of the managing director do not conflict with the interests of the company, the court may allow him to appear in a court and make representation in behalf of the company notwithstanding the fact that he does not hold a power of attorney as required by order 3 of the code of civil procedure. A managing director is vested with representative capacity and persons dealing with him in the ordinary course of business registration are entitled to assume that he has the necessary authority.

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