The Institute of Company Secretaries of India (ICSI) has issued a formal suggestion to the Ministry of Corporate Affairs (MCA) to make revisions to the Companies (Appointment and Qualification of Directors) Rules, 2014. The proposed revision aims to mandate the filing of Form DIR-11 for Key Managerial Personnel (KMP), particularly for Company Secretaries, in the event of a change in the particulars of their appointment or resignation.
Current Regulations
As per the existing rules, Directors are obligated to forward a copy of their resignation along with the reasons to the Registrar in Form DIR-11 within 30 days from the date of their resignation. Rule 18 provides for the filing of a return in case of change in the particulars of appointment of both Director and KMP. However, it has been observed that KMPs are not exercising this provision during their resignations.
The Challenge
The non-compliance with Rule 18 by KMPs, especially Company Secretaries, poses significant challenges. It affects both the individuals at the time of resignation and future appointments, and also hampers governance and regulation. The lack of a structured reporting mechanism for KMPs at the time of resignation leaves a void in the corporate governance framework.
ICSI’s Proposal
ICSI suggests that Rule 18 be revised to include a provision for KMPs, allowing them to file a copy of their resignation in Form DIR-11 within 30 days from the date of resignation. This proposed change aligns with the provision already available to Directors and ensures that corporate governance standards are met uniformly across all levels of management.
Benefits of the Proposal
The inclusion of KMPs in Rule 18 would not only aid in better compliance but also ensure that the Company Secretaries and other KMPs have a clearly outlined procedure to follow at the time of their resignation. This could contribute to enhancing corporate governance standards, offering better regulation and oversight.
Conclusion
ICSI’s formal suggestion to mandate the filing of Form DIR-11 for Key Managerial Personnel aims to bring uniformity in the treatment of Directors and KMPs under the Companies Act, 2013. If accepted, this change could significantly improve corporate governance, compliance, and facilitate smoother transitions during changes in KMP positions.
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THE INSTITUTE OF
Company Secretaries of India
IN PURSUIT OF PROFESSIONAL EXCELLENCE
Statutory body under an Act of Parliament
(Under the jurisdiction of Ministry of Corporate Affairs)
CL: MCA: 2023 Dated: August 24, 2023
Shri Manoj Govil, IAS
Secretary
Ministry of Corporate Affairs
Government of India
Shastri bhawan
New Delhi -110001
Subject: Filing of resignation by KMPs under the Companies Act, 2013
Ref: [CSI Letter dated March 23, 2017 and October 12, 2018
Dear Sir,
As you are kindly aware, the Companies Act, 2013 and the rules framed thereunder have provided for dedicated forms for the directors declaring their appointment and resignation. The Key Managerial Personnel have come to play as much an equivalent role in the overall functioning of the companies and are considered to be responsible for the overall decision making in the corporates.
Companies (Appointment and qualifications of Directors) Rules, 2014
Rule 16: Where a director resigns from his office, he may within a period of thirty days from the date of resignation, forward to the Registrar a copy of his resignation along with reasons for the resignation in Form DIR-11 along with the fee as provided in the Companies (Registration Offices and Fees) Rules, 2014.
Rule 18: A return containing the particulars of appointment of director or key managerial personnel and changes therein, shall be filed with the Registrar in Form DIR-12 along with such fee as may be provided in the Companies (Registration Offices and Fees) Rules, 2014 within thirty days of such appointment or change, as the case may be.
Although, rule 18 provides for filing of return in case of change in particulars of appointment of both director and KMP, however, it has been noticed that the same is not being done at the time of resignation by a KMP (Company Secretaries in particular). Even though, both Directors and KMPs are employees of the company as per the contract of employment; rule 16 provides the facility to forward copy of resignation in Form DIR-11 to directors only.
The same is posing challenges both to the individuals especially Company Secretaries in their capacities as KMPs, at the time of resignation and future appointments as well as posing as a governance issue hindering better compliance and regulation.
Submission
In view of the above it is submitted that Rule 18 of the Companies (Appointment and Qualification of Directors) Rules, 2014 may be revised as follows:
Rule 16 Copy of resignation’ of director to be forwarded by him
“Where a director or Key Managerial Personnel resigns from his office, he may within a period of thirty days from the date of resignation, forward to the Registrar a copy of his resignation along with reasons for the resignation in Form DIR-11 along with the fee as provided in the Companies {Registration Offices and Fees) Rules, 2014.”
Such requirement would help in strengthening the governance framework and provide the Company Secretaries with an opportunity to make good compliances pertaining to their resignation.
We shall be pleased to provide any further information or clarification in this regard on hearing from your goodself.
Thanking You,
Yours faithfully,
(CS Manish Gupta)
President
The Institute of Company Secretaries of India
