Key Managerial Personnel (KMP) refers to the employees of a company who are vested with the most important roles and responsibilities. They are in-charge of maintaining the operations of the company. Section 203 of The Companies Act, 2013 deals with provisions relating to appointment of key managerial personnel (KMP).

Applicability:

Section 203(1) of Companies Act, 2013 read with Rule 8 of Companies (Appointment and remuneration of Managerial Personnel) Amendments Rules, 2014:

Every listed company and every other public company having paid-up share capital of ten crore rupees or more 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

Provided that an individual shall not be appointed or reappointed as the chairperson of the company, as well as the managing director or Chief Executive Officer of the company at the same time unless,—

(a) the articles of such a company provide otherwise; or

(b) the company does not carry multiple businesses.

Provided further that the above proviso shall not apply to following class of companies:

Public companies having:

  • paid-up share capital of rupees one hundred crore or more and
  • annual turnover of rupees one thousand crore or more

Provided the following conditions are fulfilled:

  • Company is engaged in multiple businesses and
  • Companies which have appointed Chief Executive Officer for each such business

Note: The paid-up share capital and the annual turnover shall be decided on the basis of the latest audited balance sheet.

Terms of Appointment of KMP

Q 1. Pre-requisite for appointment of KMP?

Ans: Board Resolution (section 203(2))

Q 2. Can a whole time KMP hold office in more than one company?

Ans: No, but KMP can hold office in its subsidiary company at the same time.

Q 3. Can a KMP be appointed as Director in any other company?

Ans: Yes, but with the permission of Board.

Q 4. Can a company appoint a person as its managing director, if he is a managing director or manager of some other company?

Ans: Yes, company may appoint or employ a person as its managing director, if he is the managing director or manager 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.

Note: A 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.

Filling up of Vacancy

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 six months from the date of such vacancy.

Punishment for Contravention

  • If any company makes any default in complying with the provisions of this section, such company shall be liable to a penalty of five lakh rupees and
  • Every director and key managerial personnel of the company who is in default shall be liable to a penalty of fifty thousand rupees and
  • Where the default is a continuing one, with a further penalty of one thousand rupees for each day after the first during which such default continues but not exceeding five lakh rupees.

(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 and rules. The observations of the author are personal view and the author do not take responsibility of the same.)

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One Comment

  1. Dr. JG Muthuraj says:

    The Applicability criteria for KMP should include (apart from Paid-up share capital) also the Turnover or Profit or total assets like in other cases such as appointment oi Independent Directors, CSR etc. I see Non-Profit sec. 8 companies having a turnover of 2000 crores not appointing KMP (because their Paid-up share capital is 0) and thus their performance and compliance levels are so low and below standard.

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