This blog will help readers to understand section 203 of the Companies Act, 2013 for the appointment of KMP (Key Managerial {Personnel).

Definition

First, it is crucial to carry out online private limited company registration in India before starting the business. And, as a part of its subsequent compliances, such businesses should follow section 2(51) of the companies act, 2013, which explains the term ‘Key Managerial Personnel’ concerning the company as given below.

– The Manager, Managing Director (MD).

– The full-time director.

– The company secretary (CS).

– The CFO (chief financial officer).

– Other such officers, not more than one level below the directors in full-time employment, appointed as the key managerial personnel by the board.

– Other such officers as directed.

Also Read: Appointment of Auditor under Companies Act

Applicability of the KMP (Key Managerial Personnel)

According to provisions of section 203(1) of the companies act, 2013, read along with rule 8 of the Companies (Appointment and remuneration of managerial personnel) Rules, 2014, all the listed companies, public companies and any other companies with a paid-up share capital of Rs. 10 Crore or more should have the following full-time key managerial personnel.

– CFO (chief financial officer).

– Company secretary (CS).

– Chief executive officer (CEO) or, in their absence, the Whole-Time Director (WTD) or Managing Director (MD).

Appointment of the company secretary (CS) under rule 8A

According to rule 8A of the Companies (Appointment and remuneration of the managerial personnel) rules, 2014, the companies with paid-up share capital of Rs. 5 crores or more who are not obliged to appoint whole-time key administrative personnel under section 203(1) should have a whole-time CS.

No individual will act as the chairman and Managing Director (MD) at the same time.

The first provision to section 203(1) mandates that a person should not be appointed or reappointed as the chairperson of the company, following the company’s articles, as well as the Managing Director or the CEO (chief executive officer) of the company at the same time after the date of onset of this act unless.

– Company’s articles include provision for appointment of same person or.

– The company operates only a single business or.

– The company is involved in various businesses and has appointed one or more CEO for each such businesses, as might be stated by the central government.

Also, the provisions of this proviso should not apply to public companies with paid-up share capital of Rs. Hundred crores or more and an annual turnover of Rs. One thousand crores or more are involved in various businesses and have appointed CEO for each business separately.

Manner of appointment of KMP

According to section 203(2) provisions, every whole-time KMP of the company should be appointed utilizing board resolution, including the T&Cs of the appointment, including the remuneration.

KMP should not hold the office in more than one company the whole time except it is the subsidiary company.

Also, KMP might become the director of any company with the approval of the board.

The company might appoint or hire an individual as its Managing Director. Provided they are MD or manager of more than one company and same is sanctioned by the resolution in the board meeting with all the directors present.

Vacancy in the KMP

If the office of any whole-time KMP is vacant, the board at its meeting should fill the empty seat within a period of six months from the date of such vacancy.

Penalty for infringement of section 203

In case company makes any default in complying with provisions of section 203, company shall be liable to a penalty of Rs. 5 lakhs.

In case of director or KMP is in default then they will be liable to a penalty of Rs. 50,000.

Also Read: Proxies as per Section 105 of the Companies Act 2013

Points to keep in mind while appointing the KMP according to section 196

  • Whole-time director, managing director, or manager should not be appointed for a term of more than five years at a time.
  • Reappointment can be done for the next term before the end of the current stint but not earlier than one year before the expiry.
  • No company should appoint and continue the employment of an individual as whole-time director, managing director, or manager who has not reached the age of 21 and has attained the age of 70 years.
  • Is undischarged insolvent or has at times adjudicated as an insolvent.
  • Has at any time delayed the payment to her/his creditors or makes or has made a one-time settlement at any time.
  • Has at any time been sentenced by a court for an offence for a period of more than six months.
  • Given that an individual who has attained the age of 70 years can be appointed through passing a special resolution.