Key Managerial Personnel under the Companies Act 2013
Key managerial personnel are the employees of a company who hold key positions in the company and greater responsibility of overall functioning of the company including the duty to protect the interest of all stakeholders. Short form : Key managerial personnel are mostly referred to as "KMP" in short. Provisions under the Companies Act 2013 ("the Act") Definition of Key managerial personnel Section 2(51) of the Act defines Key managerial personnel as follows: “Key managerial personnel”, in relation to a company, means—
the Chief Executive Officer or the managing director or the manager;
the company secretary;
the whole-time director;
the Chief Financial Officer; and
such other officer as may be prescribed;
Definition under the companies act 2013 of the above referred KMPs
Chief Executive Officer (CEO) - Section 2(18)
Managing Director (MD) - Section 2(54)
Manager - Section 2(53)
Company Secretary (CS) - Section 2(24)
Whole-time Director (WTD) - Section 2(94)
Chief Financial Officer (CFO - Section 2(19)
Key managerial personnel as a Officer / Officer in Default
In accordance with section 2(59) & 2(60) of the Act, a Key managerial personnel is considered as an "Officer" and an "Officer who is in default" for the purpose of any provision in this Act.
Classes of companies required to appoint Key managerial personnel
Rule 8 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 prescribes the following classes of companies which are required to appoint whole-time KMPs:
Every listed company and
every other public company having a paid-up share capital of Rs. 10 crore or more.
Board resolution for appointment of key managerial personnel [Sec. 203(2)]
Passing of a board resolution containing terms and conditions of appointment and remuneration details of a whole-time KMP is mandatory.
Whole-time key managerial personnel not to hold office in more than one company [Sec. 203(3)]
A whole-time key managerial personnel shall not hold office in more than one company except in its subsidiary company at the same time.
With the permission of the Board of a company, a key managerial personnel can act as a director of any other company.
Appointment of managing director in more than one company
A company may appoint or employ a person as its managing director, if he is the managing director or manager of one, and of not more than one, other company, by fulfilling the following conditions:
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
specific notice has been given to all the directors then in India, for conducting of the said meeting and and for passing of the above resolution to be moved thereat.
It has to be noted here that the appointment can not be done by passing of a circular resolution.
Register of directors and key managerial personnel
In accordance with section 170(1) of the Act, every company is required to maintain a register containing particulars of its directors and key managerial personnel, which shall include the details of securities held by each of them in the company or its holding, subsidiary, subsidiary of company’s holding company or associate companies.
The register shall be kept at the registered office of the company.
Rule 17 of the Companies (Appointment and Qualification of Directors) Rules, 2014, prescribes various particulars which the said Register shall contain.
Filing of Return with ROC
In accordance with section 170(2) of the Act and rule 18 of the Companies (Appointment and Qualification of Directors) Rules, 2014, every company is required to file form DIR-12 with the Registrar of Companies, within 30 days from the appointment of every key managerial personnel and within 30 days of any change taking place.
Filing of casual vacancy
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 6 months from the date of such vacancy.
(filling of casual vacancy through circular resolution is not allowed)
Key managerial person also holding Chairperson position
A person shall not be appointed or reappointed as the chairperson 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:
The above provision will not apply to such class of companies engaged in multiple businesses and which has appointed one or more Chief Executive Officers for each such business as may be notified by the Central Government.
Penalty for non-compliance
Contravention of the provisions of section 203, will lead to the following punishable actions:
company punishable with fine which shall not be less than Rs. 1 lakh but which may extend to Rs. 5 lakh; and
every director and key managerial personnel of the company who is in default shall be punishable with fine which may extend to Rs. 50,000 and
where the contravention is a continuing one, with a further fine which may extend to Rs. 1000 for every day after the first during which the contravention continues.
Provisions under the Companies Act 1956
The Companies Act 1956 did not define the term "Key Managerial Personnel (KMP)". Definition of 'Key Managerial Personnel' of a Company was generally referred as per the definition given under the Accounting Standard 18 i.e. "the persons who have the authority and responsibility for planning, directing and controlling the activities of the reporting enterprise".