The Companies Act 1956 does not define the term "Key Managerial Personnel (KMP)". However the use of the term at various places in the said act, generally takes in its ambit the following executives:
(1) managing or whole-time director;
(the appointment of above two are done as per section 269 and schedule xiii of the said act)
Definition of 'Key Managerial Personnel' of a Company as per Accounting Standard 18 - "the persons who have the authority and responsibility for planning, directing and controlling the activities of the reporting enterprise."
For example, in the case of a company, the managing director(s), whole time director(s), manager and any person in accordance with whose directions or instructions the board of directors of the company is accustomed to act, are usually considered 'key management personnel' of that Company.
A non-executive director of a company is not considered as a key management person under this Standard by virtue of merely his being a director unless he has the authority and responsibility for planning, directing and controlling the activities of the reporting enterprise.
The new Companies Bill, 2012 (as passed in the lok sabha on 18.12.012) proposes to include in “key managerial personnel”, in relation to a company, the following employees:
(ii) the company secretary;
(iii) the whole-time director;
(iv) the Chief Financial Officer; and
(v) such other officer as may be prescribed;
The executives those are Key Managerial Personnel play a vital role in a Company and have significance influence over the entity. Companies having Key Managerial Personnel(s) are required to make required disclosures about various transaction with the Key Managerial Personnel(s).