Chief Executive under company law

1. Introduction

In a company, post of chief executive is of great importance. A chief executive is the person who runs the management of the company in accordance with the policies approved by the Directors of company. In other words, chief executive has not only to work as director of company, but has to run management of company. However, chief executive always remains subjected to directions and policies of board of directors of company.

2. Definition under sec. 2(1) (6)

Chief executive in relation to a company means as individual who object to the control and directions of the directors, is entrusted with the whole or substantially the whole, of the powers of the management of the affairs of the company and includes a director or any other person occupying the position of a chief executive by whatever name called, and whether under a contract of service or otherwise.

3. Appointment of chief executive

A company other than a company managed by a managing agent shall have a chief executive of the company. The procedure of appointment of chief executive is stated in section 198 of the company ordinance which is as under

a. Person entitled to make appointment

The directors are authorized to appoint chief executive of the company. They appoint the chief executive immediately after the incorporation of the company.

b. Appointment of first chief executive

The director of the company may appoint any individual to be the first chief executive of the company.

(i) Time of making appointment

The directors appoint the chief executive

(i)                  From the date of commencing the business of the company, or

(ii)                Within 15 days of the incorporation of the company.

(ii) Duration to hold office

The office of a chief executive may fall vacant if the resigns from his office or otherwise ceases to hold the office. In the absence of these matters, he has to vacant his office in following two cases.

(i)                  Before the first annual general meeting, or

(ii)                If directors have fixed any shorter period at the time of his appointment then he would cease to held his office on termination of that period.

c. Appointment of subsequent chief executive

The directors may also appoint the subsequent chief executive of the company. The person appointed as chief executive is either a elected director or a outsider.

(i) Time for making appointment

The directors of the company appoint subsequent chief executive

(i)                  Within fifteen days of the date of election of directors or

(ii)                When the office of chief executive falls vacant

(ii) Duration

The subsequent chief executive holds his office for a period of 3 years.

(iii) Re-appointment

The chief executive is eligible for re-appointment.

4. Terms of appointment

The term and conditions of appointment of a chief executive are determined by the following two persons.

a. Directors

The directors of the company determine the terms and conditions of appointment of chief executive in general meeting. They do not determine those terms and conditions according to their own will but while doing so they are subject to articles of association. They cannot determine those conditions by going out of these articles. Those terms and conditions of appointment are determined in the general meeting in accordance with the article of association.

b. Company

Company if desires, may determine the terms of appointment in the general meeting in accordance with the article of association. The company is also bound to respect the articles of association as the directors of the company are.

5. Restrictions on appointment

A person who is ineligible to become a director of a company under section 187 cannot be appointed or continue as the chief executive of any company.

6. Removal of chief executive

The removal of chief executive is stated in section 202 of the ordinance. The removal of the chief executive takes place easily and this has come into force by the following two ways.

a. By Directors

The directors may remove the chief executive from his office by passing a resolution with a majority of three fourths of their total numbers.

b. By Company

The company may remove the chief executive from his office. But for this purpose it has to pass special resolution. The company may by passing special resolution remove the chief executive from his office before the completion of his term.

Conclusion

I say, I include that chief executive though retires after expiry of period of three years from his appointment, ye he continues to hold his office and to perform his functions until a new chief executive is appointed.

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