One of the new concepts that have been added by the Companies Act, 2013 is “key managerial persons”. Section 2(51) of the Companies Act, 2013. The said Section states as under:
“Key managerial personnel”, in reference to a corporation , means—
(I) The Chief military officer or the director or the manager;
(ii) The company secretary;
(iii) The whole-time director;
(iv) The Chief Financial Officer; and
(v) Such other officer as may be prescribed;
The definition is flexible and more Key managerial persons can be added by the legislature.
APPOINTMENT OF KMP (SEC.203)
As per Section 203 of the Companies Act, 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, it is mandatory for a listed company and every other public company having a paid-up share capital of rupees ten crores or more, to appoint following whole-time key managerial personnel:
(i) director , or Chief military officer or manager and in their absence, a whole-time director;
(ii) Company secretary; and
(iii) Chief financial officer
An individual shall not be appointed or reappointed because the chairperson of the corporate , also because the director or chief military officer of the corporate at an equivalent time unless the articles of such a corporation provide otherwise; or the corporate doesn’t carry multiple businesses. However, such class of companies engaged in multiple businesses and which has appointed one or more chief executive officers for every such business as could also be notified by the Central Government are exempted from the above.
Manner of Appointment:
Every whole-time key managerial personnel of a corporation shall be appointed by means of a resolution of the Board containing the terms and conditions of the appointment including the remuneration.
If the office of any whole-time key managerial personnel is vacated, the resulting vacancy shall be filled-up by the Board at a gathering of the Board within a period of 6 months from the date of such vacancy.
Restriction regarding appointment:
Whole-time key managerial personnel shall not hold office in more than one company except in its subsidiary company at the same time. However, he can hold directorship in other companies with the permission of the Board.
APPOINMENT OF MANAGING DIRECTOR, WHOLE-TIME DIRECTOR OR MANAGER (SEC.196)
196(1) and (2):
No company shall appoint or employ at the same time a Managing Director and a Manager. Further, a corporation shall not appoint or reappoint a person as its director , Whole Time Director or manager for a term exceeding five years at a time and no reappointment shall be made before one year before the expiry of his term.
196(3): No company shall appoint or continue the employment of any person as managing director, whole-time director or manager who —
(a) Is below the age of twenty-one years or has attained the age of seventy years
(b) is an undercharged insolvent or has at any time been adjudged as an insolvent;
(c) Has at any time suspended payment to his creditors or makes, or has at any time made, a composition with them; or
(d) Has at any time been convicted by a court of an offence and sentenced for a period of quite six months.
Appointment of an individual who has attained the age of seventy years could also be made by passing a special resolution during which case the explanatory statement annexed to the notice for such motion shall indicate the justification for appointing such person.
Section 196(4): States that subject to the provisions of section 197 and Schedule V, a managing director, whole-time director or manager shall be appointed and the terms and conditions of such appointment and remuneration payable be approved by the Board of Directors at a gathering which shall be subject to approval by a resolution at subsequent general meeting of the company and by the Central Government.
Section 196(5): If approval of appointment is not given then the act done by managing director/ whole-time director or manager during his provisional before general meeting would be invalid.
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If you are interested in participating in the same, do let me know.
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