Summary: The article examines the implications of the National Company Law Appellate Tribunal (NCLAT) ruling in the Hamlin Trust And Ors vs Lsf10 Rose Investments S.Ã R.L. And Ors on voluntary appointment of a Chief Financial Officer (CFO) by private companies. It explains that while Section 203 of the Companies Act, 2013, mandating whole-time Key Managerial Personnel (KMP), generally applies only to listed companies and specified public companies, Section 2(51) defines a CFO as a KMP irrespective of whether the appointment is mandatory. In Hamlin Trust, the NCLAT held that a company’s Articles of Association cannot override the Act and directed that CFO nominations comply with Section 203 eligibility requirements, including restrictions on holding concurrent whole-time positions. The article notes differing interpretations of the ruling, with some viewing Section 203 as a gap-filler where Articles are silent, while others consider voluntary appointment itself sufficient to attract Section 203. It concludes that private companies should exercise caution when voluntarily appointing KMPs.
When a Private Company Appoints a CFO, Does Section 203 Follow It Through the Door?
A reading of the Hamlin Trust ruling and its implications for voluntary KMP appointments
Private companies in India have long operated on a simple assumption: Section 203 of the Companies Act, 2013 — which mandates the appointment of whole-time Key Managerial Personnel (“KMP”) — applies only to listed companies and to public companies crossing a paid-up capital threshold of ₹10 crore. Most private companies sit comfortably outside this net, and many never give it a second thought. But what happens once a private company appoints a Chief Financial Officer anyway — not because the law demands it, but because the business needs one? Does that voluntary appointment quietly pull the company back into the very compliance regime it was supposed to be exempt from?
This question reached the National Company Law Appellate Tribunal in 2022, and its answer should give every private company with a CFO, CEO, or whole-time director pause.
The Starting Point: A Definitional Trap
Section 2(51) of the Act defines “key managerial personnel” to include the Chief Executive Officer, the Managing Director, the Company Secretary, the Whole-time Director, and the Chief Financial Officer. Notice what this definition does not say: it does not say “the CFO appointed under Section 203.” It simply says the CFO is a KMP. The label alone carries the legal consequence.
This means that the moment a private company designates someone as “Chief Financial Officer” — through a board resolution, an offer letter, or even an organisation chart — that person becomes a KMP under the Act, regardless of whether Section 203 ever required the company to have one. Several other provisions of the Act key off the defined term “KMP”: disclosure of interest under Sections 184 and 189, the concept of an “officer who is in default” under Section 2(60), and related-party and remuneration disclosures elsewhere in the Act. These attach automatically, by virtue of the title, not by virtue of Section 203.
Until recently, the more interesting question — whether Section 203’s own appointment machinery and eligibility conditions also followed the CFO into a private company — was treated as comfortably settled in the negative. The Hamlin Trust ruling unsettled that comfort.
The Hamlin Trust Dispute
The case arose out of a joint venture gone wrong. Rattan India Finance Private Limited was held equally by Hamlin Trust and by LSFIO Rose Investments S.a.r.l., a Luxembourg entity. Under Article 140 of the company’s Articles of Association, Rose Investments held the right to nominate the company’s CFO, with Hamlin Trust holding a right to reject up to two nominees before a third nominee would stand automatically appointed.
Rose Investments’ third nominee was already serving as managing director of another company and was not available to work whole-time. Hamlin Trust objected, arguing the nomination was invalid because it contravened Section 203(3) of the Act, which bars a whole-time KMP from holding office in more than one company simultaneously (barring a subsidiary, with Board permission). Rose Investments’ response was straightforward: the company was private, Section 203 did not apply to it, and Article 140 of the AoA was self-contained and exhaustive on its own terms.
The NCLT initially agreed with Rose Investments and upheld the appointment. Hamlin Trust appealed to the NCLAT.
What the NCLAT Held
The Appellate Tribunal reversed the NCLT and sided with Hamlin Trust. Its reasoning rested on two connected points. First, the CFO is statutorily a KMP under Section 2(51), and Section 203 lays down the conditions of eligibility for a whole-time KMP — including the bar on holding office elsewhere. Second, and more significantly, the Tribunal held that the Articles of Association of a company cannot override the provisions of the Act, and that wherever the Articles are silent on eligibility, it is logical to read the statute in to fill that gap:
“…provisions of the AoA cannot override the provisions of the Act and whenever the provisions of the AoA are silent, it is perfectly logical and rational that reference be made to the Act to consider the eligibility criteria of KMPs.”
The NCLAT directed the parties to go back and re-nominate CFO candidates, this time “keeping in view section 203 of the Companies Act, 2013,” and held that any nominee must satisfy Section 203’s basic eligibility conditions. Notably, the order also recorded — without disturbing — an earlier direction that the CFO file an affidavit undertaking compliance with Sections 184 and 189 as well, suggesting the wider universe of KMP-linked obligations was treated as travelling with the appointment, not just Section 203 in isolation.
A Narrow Holding, or a Broad One?
Here the commentary splits, and the split matters. A closer reading of paragraph 27 of the order shows the Tribunal framing its reasoning around the fact that the company’s own Articles were silent on CFO eligibility — suggesting Section 203 was invoked as a gap-filler, not as an independently binding rule for private companies as such. On this narrower reading, a company with its own clear, well-drafted eligibility criteria in its Articles might never need to reach for Section 203 at all. Other commentators read the outcome more literally: the Tribunal directed compliance with Section 203 without conditioning this on the Articles’ silence, and disqualified a nominee purely for failing Section 203(3). On this broader reading, voluntarily conferring KMP status is itself the trigger — once a private company calls someone its CFO, Section 203 applies in full, Articles or no Articles.
This is not merely academic. The Registrar of Companies, Karnataka, separately imposed penalties on Landomus Realty Private Limited for appointing its own director as CFO in a manner contravening Section 203 — a clear signal that at least some regulators are prepared to apply the broader reading in enforcement, independent of any gap in the company’s constitutional documents.
Where This Leaves Private Companies
Three things follow with reasonable confidence. One, any private company appointing a CFO — or a CEO, Managing Director, or whole-time Director — confers KMP status the instant it does so, triggering Sections 184, 189, and other KMP-linked obligations regardless of Section 203’s applicability. Two, after Hamlin Trust, it is no longer safe to assume that Section 203’s own eligibility and process requirements simply do not reach a sub-threshold private company; at least at the NCLAT level, and in at least one ROC enforcement action, they have been held to apply once the appointment is made voluntarily. Three, the prudent course is to treat a CFO appointment as if Section 203 governs it in full — board-resolution-based appointment, no concurrent whole-time office elsewhere absent the subsidiary exception, and timely filling of any vacancy — rather than relying on the company’s size or classification as a shield.
Some commentators push the logic further, suggesting that any voluntary assumption of a statutory status not otherwise required — a private company voluntarily constituting an Audit Committee, for instance — could trigger the full attendant consequences of that status, such as mandatory related-party approval through that committee. That extension remains untested, but the direction of travel is clear: calling something into existence voluntarily is increasingly being read as accepting the rules that would have governed it had the law required it in the first place.
This article is for general information only and does not constitute legal advice. Hamlin Trust is an NCLAT ruling open to being revisited by a higher forum; readers should seek specific advice before relying on the broader reading discussed above.
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Author – CS Divesh Goyal, GOYAL DIVESH & ASSOCIATES Company Secretary in Practice from Delhi and can be contacted at csdiveshgoyal@gmail.com).
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