Authentication of Documents by KMP’s: Does Section 21 Automatically Empower KMP’s?

Authentication of Documents by KMP’s: Does Section 21 Automatically Empower KMP’s?

Overview

Section 21 of the Companies Act, 2013 governs the authentication of documents, proceedings, and contracts made by or on behalf of a company. It ensures that only authorized personnel can validate official company records (including Resolution), thereby safeguarding the company from unauthorized or fraudulent actions.

What the Law Says

Section 21 of the Companies Act, 2013 states that:

(a) a document or proceeding requiring authentication by a company; or

(b) contracts made by or on behalf of a company, may be signed by any key managerial personnel or an officer or employee of the company duly authorised by the Board in this behalf.”

This means:

• Being a KMP alone is not sufficient.
• The KMP (e.g., CS, CEO, CFO etc.) must be explicitly authorized by the Board to authenticate documents.

Here the Key Managerial Personnel (KMP) as per Section 2(51) of the Companies Act, 2013 means:

• CEO or MD or Manager;
• Company Secretary;
• Whole-time Director;
• CFO;
• 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;

Role of Key Managerial Personnel’s (KMP’s)

Under Section 21, both the Chief Financial Officer (CFO) or Chief Executive Officer (CEO) fall under the category of Key Managerial Personnel (KMP) as defined in Section 2(51) of the Act. This means “their signatures on official documents, contracts, or proceedings are legally valid if they are acting within their designated authority.”

Types of Documents They May Authenticate

• Financial statements and audit reports
• Board resolutions and minutes
• Contracts and agreements with vendors or clients
• Statutory filings with regulatory authorities (e.g., ROC, SEBI)
• Internal policy documents and HR communications

Common Misunderstanding

Some practitioners assume that since KMPs are senior officers, they are automatically empowered. However:

• The phrase “duly authorised by the Board” applies even to KMPs.
• The law does not create an automatic right for KMPs to authenticate documents — it merely allows them to do so if authorized.

Who Can Issue Certified Copies?

• Company Secretary (CS) is traditionally responsible for certifying board resolutions.
• In the absence of a CS, the CEO, CFO, Managing Director, or any other KMP may issue certified copies if authorized by the Board.
• The Board of Directors may pass a resolution explicitly authorizing a KMP to certify resolutions.

Key Conditions

• The KMP must be formally designated and authorized either by the Articles of Association or a board resolution.
• The certified copy must clearly state that it is a true extract of the resolution passed at a duly convened meeting.
• The certification should include:
  • Date of the board meeting
  • Resolution number (if applicable)
  • Signature of the authorized KMP
  • Company seal (if required)

Practical Implication

To comply with Section 21:

• The Board should pass a formal resolution authorizing specific KMPs (like CEO or CFO) to authenticate documents.
• This authorization can be general (e.g., “all statutory documents”) or specific (e.g., “contracts with vendors”).

Practical Considerations

• For filings with the Registrar of Companies (ROC), the certifying authority must be listed as an authorized signatory in the company’s records.
• If the company has a Company Secretary, they are the preferred certifying authority.
• In case of litigation or regulatory scrutiny, certified copies issued by unauthorized personnel may be challenged.

Rule 8 and Section 21: How They Work Together

Rule 8 of Companies (Registration Offices and Fees) Rules, 2014

• Specifies how documents are to be authenticated when submitted to the Registrar of Companies (ROC) or other authorities.
• States that:

“Scanned image of documents shall be of original signed documents relevant to the e-forms or forms and the scanned document image shall not be left blank without bearing the actual signature of authorised person.

Every document, electronic form or application filed with the Registrar shall be authenticated by authorized signatory using digital signature.”

Safeguards and Compliance

• The Board may still pass a resolution to explicitly authorize the CS, CEO or CFO for specific types of documents.
• Digital authentication (e.g., digital signatures) must comply with the Companies (Registration Offices and Fees) Rules, 2014.
• Unauthorized authentication by any person not covered under Section 21 may lead to legal consequences and invalidity of the document.

Compliance Checklist

• Board resolution authorizing the KMP under Section 21.
• KMP registered as authorized signatory in MCA portal.
• Valid digital signature certificate (DSC).
• Document signed and submitted in prescribed format.

Judicial Interpretation

Courts have upheld that authentication by KMPs like the CFO and CEO is valid as long as:

• The person is officially designated as KMP.
• The document pertains to their functional domain.
• No contrary provision exists in the company’s Articles of Association or other applicable laws.

Example Board Resolution

“RESOLVED THAT / RESOLVED FURTHER THAT Mr. X, Chief Financial Officer of the Company, be and is hereby authorized to authenticate all documents, contracts, and proceedings on behalf of the Company under Section 21 of the Companies Act, 2013.”