CS M. Kurthalanathan
Applicability:
Every listed company and every other public company having paid up share capital of Rs.10 Crores or more shall have the following whole-time Key Managerial Personnel (KMP),—
(i) Managing Director (MD) or Chief Executive Officer (CEO) or manager and in their absence, Whole- Time Director(WTD)
(ii) Company Secretary; and
(iii) Chief Financial Officer (CFO)
A company other than a company covered above,(i.e., Private Company) which has a paid up share capital of Rs.5 Crores or more shall have a whole–time Company Secretary.
Appointment:
An individual shall not be appointed or reappointed as the chairperson of the company, in pursuance of the articles of the company, as well as the MD or CEO of the company at the same time after the date of commencement of this Act unless,—
(a) the articles of such a company provide otherwise; or
(b) the company does not carry multiple businesses:
It is not applicable to such class of companies engaged in multiple businesses and which has appointed one or more CEO for each such business as may be notified by the Central Government.
Every whole-time KMP of a company shall be appointed by means of a resolution of the Board containing the terms and conditions of the appointment including the remuneration.
Holding of Office:
A whole-time KMP shall not hold office in more than one company except in its subsidiary company at the same time.
A KMP shall be appointed as a director of any company with the permission of the Board.
A whole-time KMP holding office in more than one company at the same time on the date of commencement of this Act, shall, within a period of six months from such commencement, choose one company, in which he wishes to continue to hold the office of KMP.
A company may appoint or employ a person as its MD, if he is the MD or manager of one, and of not more than one, other company and such appointment or employment is made or approved by a resolution passed at a meeting of the Board with the consent of all the directors present at the meeting and of which meeting, and of the resolution to be moved thereat, specific notice has been given to all the directors then in India.
Filling of Vacancy:
If the office of any whole-time KMP is vacated, the resulting vacancy shall be filled-up by the Board at a meeting of the Board within a period of six months from the date of such vacancy.
Penalty:
| Company | Fine of Rs.1,00,000/- to Rs.5,00,000/- |
| Director & KMP | Fine of Rs.50,000/-
Continuing one – Rs.1,000/- per day |
Appointment of KMP – Companies Act,2013 Vs Companies Act,1956:
| S.No | CA 2013 | CA,1956 |
| 1 | It bars an individual from being appointed chairperson as well as MD/CEO unless (a) the articles provide otherwise; or (b) the company does not carry multiple businesses.
However, such class of companies engages in multiple businesses which have appointed one or more CEOs for each business are exempt from this provision. |
There was no such bar in the CA,1956. |
| 2 | It requires every whole-time KMP to be appointed by a board resolution containing terms and conditions of appointment including remuneration. | There was no such provision in CA,1956. |
| 3 | It provides that a whole –time KMP not to hold office in more than one company except in its subsidiary company at the same time. | There was no such provision in CA,1956. |
| 4 | It provides that if office of KMP vacated, resulting vacancy to be filled up by board at board meeting within 6 months. | There was no such provision in CA,1956. |
Disclaimer: The entire contents of this document have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation. Though utmost efforts has made to provide authentic information, it is suggested that to have better understanding kindly cross-check the relevant sections, rules under the Companies Act,2013
Your contention that even a Private Company with paid up share capital of Rs.5 Crores or more shall have a whole–time Company Secretary, requires reconsideration. Rule 8 speaks about all listed cos, and unlisted cos. having paid up capital of Rs.10 crores. The intention of Rule 8A cannot be to cover private co. but to cover unlisted public co. having paid up capital of Rs. 5 crores. In other words, all listed cos. and unlisted cos. with paid up capital of Rs. 5 crores and more are covered. But it does not apply to private companies with paid up capital of Rs.5 crores or more. Otherwise unlisted cos. having less than paid up capital of Rs. 10 crores are not covered but private co. with Rs. 5 crores are covered. This is not justified. Will you pl. throw some more light ?
Thanks….
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