Form MR-1: Return of Appointment of Managing Director, Whole-time Director or Manager

When MR-1 applies

Section 196 governs the appointment of a managing director, whole-time director or manager. The appointment and its terms, including remuneration, are approved by the board and then by members at the next general meeting. Section 196(4) requires a return in the prescribed form to be filed within 60 days of the appointment, which is MR-1.

Private companies are exempted from sub-sections (4) and (5) of Section 196 by the June 2015 exemption notification for private companies, so MR-1 is mainly a public company filing. A private company still reports the change in designation through DIR-12. Check your company's status before deciding.

Schedule V and Central Government approval

An appointment that satisfies the conditions in Part I of Schedule V does not need Central Government approval. If the appointee does not meet those conditions, for example because of a specified conviction or detention, or the remuneration exceeds the limits allowed where profits are inadequate, Central Government approval is needed and its details are entered in MR-1.

Section 196(3) also sets age limits. A person below 21 or above 70 cannot be appointed, though a person above 70 can be appointed by special resolution with justification in the explanatory statement. In that case the MGT-14 SRN for the special resolution is entered in MR-1.

Attachments

MR-1 is a short form, but it relies on the approvals behind the appointment. The professional who certifies it checks each of these documents, so keep certified copies ready before starting the filing.

• Certified copy of the board resolution
• Certified copy of the members' resolution with explanatory statement, where passed
• Consent of the appointee to act
• Nomination and Remuneration Committee recommendation, where applicable
• Central Government approval, where required

Fees, certification and penalties

The normal fee follows the nominal-capital slab of ₹200 to ₹600. Late filing attracts the standard additional fee multiples, starting at 2x the normal fee for a delay of up to 30 days and rising to 12x beyond 180 days.

MR-1 must be digitally certified by a chartered accountant, cost accountant or company secretary in whole-time practice, who enters membership and certificate of practice numbers. Where no specific penalty is provided, the general penalty under Section 450 can apply: ₹10,000 plus ₹1,000 per day, up to ₹2 lakh for the company and ₹50,000 for an officer.

Common mistakes

For public companies, remuneration of managerial personnel is also governed by Section 197, which caps total managerial remuneration at 11% of net profits unless members approve more by special resolution. Remuneration figures in MR-1 should match the approved terms exactly.

Errors include counting 60 days from the members' approval rather than the appointment date, omitting the explanatory statement, entering remuneration that does not match the resolution, and forgetting the separate DIR-12 for the change in designation. A managing director's term cannot exceed five years at a time, and reappointment cannot be made earlier than one year before the term expires. Refogo's partner professionals can file MR-1 and DIR-12 for a fixed fee.

Step by step

1. 1Check eligibility

   Confirm Schedule V conditions and age limits.

2. 2Board approval

   Board approves the appointment and terms, with NRC recommendation where required.

3. 3Members' approval

   Obtain approval at the next general meeting; file MGT-14 if a special resolution.

4. 4File DIR-12

   Report the change in designation within 30 days.

5. 5File MR-1

   Within 60 days of appointment, with professional certification and DSC.