The project sponsor is not supposed to be involved (Project Plan para 3.4.1) – is that critical? We’re a small company where the MD will be very much driving this. If necessary, I could choose our chairman but our MD would be better in practice.
For small companies (up to 50 employees) it is not critical that the project sponsor do not get directly involved with the project. This “no involvement” is normally defined because the project sponsor is often part of top management, and if he gets to involved with the project (i.e., acts as a project manager), this situation may end impacting his other functions.
In case the managing director (MD) has the necessary authority to solve problems that can make the project stuck, and make decisions to ensure project success, there is no problem for this role to be assigned as the project sponsor, instead of the chairman.