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What is the responsibility of Managing Director in a compnay?

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posted Apr 12, 2016 by Durga Prasad

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The managing director shall by acting carefully contribute to the interests of the company. The managing director shall see to the day-to-day management of the company in accordance with the instructions and orders given by the board of directors.

Matters belonging to the day-to-day management vary case by case depending among other things on the size of the company. Such matters as direction and supervision of the business and human resources issues (with respect to the immediate subordinates of the managing director) are generally considered to be day-to-day management. The managing director is responsible for contract negotiations with business partners and clients as well as for fulfillment and monitoring of the agreements and other obligations of the company. Thus, he/she is, inter alia, responsible for management and supervision of invoicing and payment of bills, including salaries and the employer’s social charges and payroll taxes. The managing director is also responsible for making sure that the company has sufficient liquidity. He/she may generally on behalf of the company issue such delivery credits and guarantees on standard terms that are connected to the company’s daily routines. The managing director may also decide upon taking a short-term credit in order to ensure the liquidity unless something else has been decided upon in the company. Furthermore, ordinary investment of cash assets belongs to the duties of the managing director, at least to the extent that the investments are short-term and significant credit loss risk is not connected to them. Secure bank deposits are mainly considered as being such. On the other hand, the managing director may not make equity investments with the company’s money.

The managing director is responsible for making sure that the accounts of the company and its financial affairs have been arranged in a reliable manner. Making Trade Register amendments also belong to the duties of the managing director.

As an exception, the managing director may also undertake measures that are unusual or extensive in view of the scope and nature of the activities of the company if it is not possible to wait for a decision of the board of directors without causing essential harm to the business operations of the company. In this case, the board of directors shall be notified of the measures as soon as possible.

The managing director shall make sure that the board of directors receives the information necessary for the performance of its duties. The managing director shall on his/her own initiative notify the board of directors of significant matters relating to the company’s operations. The development of sales and considerable credit losses and agreements are considered as such matters.

The managing director has the right to demand for a board meeting to be convened as well as to be present at the board meetings and to be heard there in so far as the board of directors does not decide otherwise in certain situations. He/she has the right to have his/her dissent entered into the minutes of the meeting.

The managing director has the right and obligation to be present at the general meeting of shareholders. He/she has also a right to be heard at the meeting.

The managing director drafts and signs the annual accounts together with the members of the board of directors. He/she has the right to have his/her dissent entered into the annual accounts.

The managing director represents the company in matters, which by virtue of law belong to the duties of the managing director. This right is independent of the separate right to sign for the company.

The division of duties between the board of directors and the managing director may be clarified in the articles of association and with directions given by the board of directors as well as in a shareholders’ agreement. The board of directors can also authorize the managing director to take care of the non-routine administration or restrict the competence of the managing director by taking matters belonging to him up for a decision.​

answer Jun 22 by Prachi
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