Appointment of CTO, COO, and CMO as KMP: Compliance Guide

Appointment of other officer such as CTO, COO, and CMO as Key Managerial Personnel (KMP) under Companies Act, 2013 – Key Considerations

Under the Companies Act, 2013, certain roles are defined as Key Managerial Personnel (KMP) to ensure effective governance and compliance. While the Act explicitly identifies positions such as Managing Director (MD), Chief Executive Officer (CEO), Chief Financial Officer (CFO), and Company Secretary (CS) as KMP, the inclusion of roles like Chief Technology Officer (CTO), Chief Operating Officer (COO), or Chief Marketing Officer (CMO) as KMP is discretionary and depends on the company’s internal structure and governance needs.

Key Considerations for Recognizing CXO Roles such as CTO, COO, or CMO as KMP:

Statutory Definition of KMP (Section 2(51)): “Key Managerial Personnel,” in relation to a company, means:

(i) The Chief Executive Officer or the Managing Director or the Manager.

(ii) The Company Secretary.

(iii) The Whole-Time Director.

(iv) The Chief Financial Officer.

(v) Such other officer, not more than one level below the Directors who is in whole-time employment, designated as Key Managerial Personnel by the Board.

(vi) Such other officer as may be prescribed.

As per Clause (v) of Section 2(51), a company may designate other officers such as CTO, COO, or CMO as KMP if their roles significantly impact strategic decision-making.

• Board Approval
  To designate other officers such as CTO, COO, or CMO as KMP, the following provisions must be adhered to:
  • Section 179: Approval of the Board of Directors is required to appoint or remove KMP. The resolution must be passed at a Board meeting.
  • Section 203(2): Every whole-time KMP must be appointed by means of a Board resolution specifying the terms and conditions of the appointment, including remuneration.

• MCA E-Form Filing
  If CTO, COO, or CMO are designated as KMP, certain nuances in the e-filing process must be noted:
  • Form MGT-14: Filing Form MGT-14 is required for appointment or removal of KMP including for other officers such as CTO, COO, or CMO designated as KMP.
  • Form DIR-12: Filing Form DIR-12 is not required for other officers such as CTO, COO, or CMO designated as KMP, as the form does not provide an option to capture their appointments unless they are appointed as a director.
  • Form MR-1: Form MR-1 (Return of Appointment of Managerial Personnel) applies only to managerial personnel such as Managing Directors, Whole-Time Directors, or Managers. Hence, it cannot be filed for other officers such as CTO, COO, or CMO designated as KMP.
  • Form MGT-7/MGT-7A: Annual return forms also do not include a provision for recording details of other officers such as CTO, COO, or CMO.

• Further Disclosures
  To maintain transparency and meet compliance obligations, the following disclosures must be made:
  • Annual Reports and Financial Statements: Details of KMPs, including other officers such as CTO, COO, or CMO designated as KMP, must be disclosed in the company’s Annual Reports and Financial Statements.
  • Board Report: Mention the appointment of the other officers such as CTO, COO, or CMO and highlight their contribution as part of the company’s strategic initiatives.
  • Documentation: Ensure that the appointment of the other officers such as CTO, COO, or CMO as KMP is documented in:
    • Board Meeting minutes.
    • The appointment letter.
    • Employment agreements, if any.
  • SEBI LODR Disclosure: Pursuant to Regulation 30 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, every listed entity is required to disclose Change in key managerial personnel.
  • Other Disclosures: Wherever the Companies Act specifies requirements or compliance related to KMP, such compliance must also be adhered to for other officers such as CTO, COO, or CMO.

Summary:

While the Companies Act, 2013, requires the filing of Form DIR-12 for important roles such as CEO, CFO, WTD, and MD, it does not mandate the filing of Form DIR-12 for other officers such as CTO, COO, or CMO designated as KMP. However, companies can voluntarily recognize these roles based on their strategic importance. Proper Board approval, adherence to disclosure requirements, and thorough documentation ensure that the appointment process aligns with the company’s governance priorities and statutory obligations.

This discretionary recognition underscores the evolving role of other officers such as CTO, COO, or CMO in corporate management, reflecting their contribution to the company’s growth and governance framework.