Appointment of Key Managerial Personnel (KMP) in Two Companies

A. SHORT SUMMARY:

The purpose behind this editorial is to discuss the concept of Key Managerial Personnel (KMP), Process of appointment, appointment in another Companies, appointment in Subsidiaries, forms required to file for such appointment etc and To discuss following frequently asked questions:

A. Whether a CS of holding Company can be appointed as CS in Subsidiary or subsidiaries of holding Company?

B. Whether a person can be appointed on two positions such as MD and CFO or any other combination?

C. Whether a KMP can be appointed as Director in any other Company or Companies?

FIRST: – PERSONS INCLUDES – KMP

Every company belonging to such class or classes of companies as may be prescribed shall have the following whole-time key managerial personnel,—

(i) Managing Director, or Chief Executive Officer or Manager and in their absence, a whole-time director;

(ii) Company Secretary; and

(iii) Chief Financial Officer:

SECOND: – SINGLE PERSON CAN BE APPOINTED AS MD AND CFO OR IN ANY OTHER COMBINATION :

It is no where restricted under Act for appointment of MD as CFO or CS as CEO or CFO as CEO or any other combinations

As per Definition of KMP and Section 203(1): Every company falls in limit of Section 203 need to appoint Whole Time Key managerial Personnel’s in three positions.

One can opine that:

Company required separate person for each category. Therefore, there should be at least 3 separate people to comply with provisions of Section 203(1).

If in the given example MD also appointed as CFO, still he will be counted at only one category of KMP whether as MD or CFO. Company requires appointing at least 3 person for all three categories.

SECOND: – APPOINTMENT OF COMPANY SECRETARY IN SUBSIDIARY COMPANY:

As per Companies Act, 2013 Company Secretary shall be considered as Whole Time Key Managerial Personnel of Company.

If a person is whole time employee in any company he can’t appoint as whole time employee in any other Company. Therefore, a CS can’t get appointment as CS in any other Company. Except

As per Section 203(3)(a) A whole-time key managerial personnel shall not hold office in more than one company except in its subsidiary company at the same time.

One can opine that:

As per section 203(3)(a), a KMP can be appointed as KMP in its Subsidiary Company. Therefore, Company can file DIR-12 in subsidiary company also for appointment of CS of Holding Company in subsidiary Company.

However, as per Act KMP of holding Company can be appointing as KMP only in one subsidiary. Because in act language used word singular i.e. “Subsidiary”.

THIRD: – APPOINTMENT OF KMP AS DIRECTOR IN ANOTHER COMPANY

As per Companies Act, 2013, Section 203(3) Provided that nothing contained in this sub-section shall dis-entitle a key managerial personnel from being a director of any company with the permission of the Board.

 One can opine that:

A KMP can be appointed as Director in any other Company subject to approval of Board of Directors.

Legally KMP is Whole time Employee of Company therefore, KMP can be appointed only as Non-executive Director in any other Company.

Author – CS Divesh Goyal, GOYAL DIVESH & ASSOCIATES Company Secretary in Practice from Delhi and can be contacted at csdiveshgoyal@gmail.com).