Appointment of key managerial personnel l Section 203 | Companies Act, 2013

Key Managerial Personnel (also known as KMP) refers to the whole time employees of the company who are vested with the most important roles and responsibilities of the company. The Key Managerial Personnel monitor and achieve the goals and objectives targeted by the Board of Directors of the Company. The definition of KMP is given under Companies Act, 2013:

As per section 2(51) of the companies act, 2013, “Key managerial personnel” means in relation to company means:

1. Managing Director, or Chief Executive Officer or Manager

2. Company Secretary;

3. Whole time director

4. Chief Financial Officer

5. 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; and

6. such other officer as may be prescribed

Applicability: Section 201(1) read with Rule 8 of Companies (Appointment and remuneration of managerial personnel) Rules, 2014 following companies are eligible to have whole-time key managerial personnel:

• Every Listed Company
• Every other public company having a paid-up share capital of Ten crores rupees or
• Every private company which has a paid up share capital of ten crore rupees or more shall have a whole -time company secretary.

Proviso: 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 Managing Director or Chief Executive Officer of the company at the same time after the date of commencement of this Act unless,-

• the articles of such a company provide otherwise; or
• the company does not carry multiple businesses:

Exemption of this proviso: It shall not apply to such class of companies who are engaged in multiple businesses and which has appointed one or more Chief Executive Officers for each such business as may be notified by the Central Government.

 Appointment by Board Resolution: Section 203(2): Every whole-time key managerial personnel of a company shall be appointed by passing the Board resolution in the meeting which is containing the terms and conditions of the appointment including the remuneration.

KMP more than 1 company: Section 203(3): A whole-time key managerial personnel shall not hold office in more than one company except in its subsidiary company at the same time:

Proviso:

1. Provided that nothing contained in this sub-section shall disentitle a key managerial personnel from being a director of any company with the permission of the Board:

2. Whole-time key managerial personnel 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 key managerial personnel:

3. Company may appoint or employ a person as its managing director, if he is the managing director 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.

Vacancy of KMP: Section 203(4): If the office of any whole-time key managerial personnel is vacated, the resulting vacancy shall be filled-up by the Board at a meeting of the Board within a period of 6 months from the date of such vacancy.

Penalty: Section 203(5): If any company makes any default in complying with the provisions of this section, such company shall be liable to a penalty:

PROCEDURE FOR APPOINTMENT OF KMP:

• Convene a Board Meeting as per section 173 of the Companies Act, 2013 and pass the resolution for the appointment of KMP with the terms and conditions of appointment and remuneration.
• Issue appointment letter to the KMP containing the details of appointment date, remuneration, tenure (if specified any) and other terms and conditions.
• Listed Company shall submit the disclosure of such appointment to the Stock Exchange within 24 hours from the date of the Board Meeting and post the same on the website of the Company within 2 working days as per SEBI (LODR) Regulations, 2015
• Every Listed Company and every other Public Company shall file a copy of Board Resolution with the ROC in form MGT-14 within 30 days of passing of such resolution.
• Company shall file the particulars of appointment of KMP to ROC in Form DIR-12 within 30 days of such appointment.
• Company shall file Form MR 1 within 60 days of appointment of Managerial Personnel i.e Managing Director/ Whole Time Director/ Manger. This form is not applicable to Private Company and Government Company.
• Company shall make necessary entries in the Register of Director and Key Managerial Personals.

RESTRICTIONS REGARDING APPOINTMENT OF KEY MANAGERIAL PERSONNEL:

1. No company shall appoint or employ at the same time a managing director and a manager.

2. No company shall appoint or re-appoint any person as its managing director, whole-time director or manager for a term exceeding five years at a time: Provided that no re-appointment shall be made earlier than one year before the expiry of his term.

3. No company shall appoint or continue the employment of any person as managing director, whole-time director or manager who —

• is below the age of twenty-one years or has attained the age of seventy years: (Provided that appointment of a person who has attained the age of seventy years may be made by passing a special resolution;)
• is an undischarged insolvent or has at any time been adjudged as an insolvent;
• has at any time suspended payment to his creditors or makes, or has at any time made, a composition with them; or
• has at any time been convicted by a court of an offence and sentenced for a period of more than six months.
• He is in Indian Resident
• He Has been sentenced to imprisonment or has been fined with more than Rs.1000 for the Conviction of an offence under certain acts.
• He Wasn’t detained under the Conservation of foreign Exchange and Prevention of Smuggling Activities Act, 197

Disclaimer: –The above mentioned article has been based on relevant provisions of Companies Act, 2013. Under no circumstance, the author shall not liable for any direct, indirect, special or incidental damage resulting from, arising out of or in connection with the use of the information.