Key Managerial Personnel

Chapter XIII of the Companies Act, 2013 read with Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 deal with the legal and procedural aspects of appointment of Key Managerial Personnel including Managing Director, Whole-time Director or Manager, managerial remuneration, secretarial audit etc.

Key Managerial Personnel

The Companies Act, 2013 has for the first time recognized the concept of Key Managerial Personnel. As per section 2(51) “key managerial personnel”, in relation to a company, means—

 Let’s discuss the definition of Key Managerial Personnel:

Managing Director

Section 2(54) of the Companies Act, 2013, defines ‘managing director’. It stipulates that a “managing director” means a director who, by virtue of the articles of a company or an agreement with the company or a resolution passed in its general meeting, or by its Board of Directors, is entrusted with substantial powers of management of the affairs of the company and includes a director occupying the position of managing director, by whatever name called.

Whole Time Director

Section 2 (94) of the Companies Act, 2013 defines “whole-time director” as a director in the whole-time employment of the company.

Manager

Section 2(53) of the Companies Act, 2013 defines “manager” as an individual who, subject to the superintendence, control and direction of the Board of Directors, has the management of the whole, or substantially the whole, of the affairs of a company, and includes a director or any other person occupying the position of a manager, by whatever name called, whether under a contract of service or not.

Chief Executive Officer & Chief Financial Officer

Section 2(18)/(19) of the Companies Act, 2013 defined “Chief Executive Officer”/ “Chief Financial Officer” as an officer of a company, who has been designated as such by it;

Company Secretary

Section 2(24) of the Companies Act, 2013 defines “company secretary” or “secretary” means a company secretary as defined in clause (c) of sub-section (1) of section 2 of the Company Secretaries Act, 1980 who is appointed by a company to perform the functions of a company secretary under this Act;

 Which Companies are mandatorily required to appoint KMP

As per Section 203 of the Companies Act, 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules.2014, the following class of Companies, namely

•  Every listed Company and
• Every other public company having paid up share capital of Rs.10 Crores of more

Further, as per recently notified Rule 8A of the Companies (Appointment and Remuneration of  Managerial Personnel ) Rules.2014, a company other than a company which is required to appoint a whole time key managerial personnel as discussed above and which is having paid up share capital of Rs.5 Crores or more shall have a whole time Company Secretary.

ROC filing for Appointment of Key Managerial Personnel and /or Changes in Key Managerial Personnel :

Penalty

If a company contravenes the aforesaid provisions ( contained in section 203 of the Companies Act ), the company shall be punishable with a minimum fine of Rs.100000 and maximum of Rs.500000. In addition every director and key managerial personnel of the company who is in default shall be punishable with fine which may extend to Rs. 50000 and where the contravention is continuing one, with a further fine which may extend to Rs.1000 for every day after the first during which the contravention continues.