KEY MANAGERIAL PERSONNEL
Key
Managerial Personnel are the employee of the Company who hold the Key Position
in the Company and Greater responsibility of overall functioning of the Company
including the duty to protect the interest of the Stakeholder.
Under Section 2 (51), of the Companies Act,
2013 KMP in relation to a Company mean:-
1. Chief
Executive Officer or the Managing Director or the Manager;
2. Company Secretary;
3. Whole
time Director;
4. Chief
Financial Officer,
5. Such other officer, not more than one level below the directors who is in whole- time-employment, designated as key managerial personnel by the board and
5. Such
other officer as may be prescribed
Appointment:
As per Section 203(1) of the Companies Act, 2013 read with
Rule 8 and 8A of the Companies (Appointment and Remuneration of Managerial
personnel) Rule, 2014; a listed company and every other public company mention
under Rule 8 is required to appoint a whole time KMP.
As per Rule 8:
Every listed
Company and every other public company having a paid up share capital of ten crore
rupees or more is required to appoint a whole time Key Managerial Personnel.
As per Rule 8A:
A Company
other than the Company mention under Rule 8 having a paid up Share capital of
five crore rupees or more is required to appoint a Whole time Company
Secretary.
Proviso to sub section (1)
Provided
that an individual shall not be appointed or reappointed as a chairperson or
Managing Director or Chief Executive officer of the company at the same time unless:
1. The
article of the company otherwise provides;
2. The
company is not carrying multiple business.
Provided
further that nothing contain in first proviso shall apply to such class of
company engage in multiple businesses and which has appointed one or more Chief
Executive Officer for each such Business.
Note: Such class of Company as per
notification dated on 25th July, 2014 will mean a public company
having a paid up share capital of one hundered crore or more and annual
turnover of one thousand crore or more which are engage in multiple businesses
and have appointed Chief Executive Officer for each of such businesses
Explanation: the paid up share capital and annual
turnover shall be decided on the basis of latest audited balance sheet.
Note: If a KMP is appointment the company
shall file return of appointment of a Managing Director, Whole Time Director or
Manager within 60 days of the appointment with the registrar in Form MR.1, the
Form MR.1 is not required to be file in case of Chief Executive officer,
Company Secretary and Chief Financial officer (Notification dated on 30th,june,2016).
Sub section (2) of section 203 Every KMP of the company shall be
appointed by means of resolution passed by Board containing the terms and
condition of appointment including the remuneration.
Note: Resolution duly passed at the Board
Meeting and not by Resolution by Circulation under section 175 of the companies
act, 2013.
Sub Section (3) of Section 203: A whole time KMP shall not hold
office in more than one company except in its subsidiary at the same time.
Provided
that nothing in this sub section shall affect a KMP from holding office in any
other company as a director with the permission of the board.
Provided
also that 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 and 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.
Note: As per above proviso, unanimous
approval (100%) of the board is required. In whole Companies Act, 2013 only for
this business the Special Notice word has been used for BOD Meeting, and the
notice should disclose that the consent of all directors are required. Also
there is no prohibition for a person to hold two position as a KMP in a single
company.
Sub section (4) of section 203: If the office of KMP is vacated, the
resulting vacancy shall be filled up by the Board at the meeting of board
within a period of six months from the date of such vacancy.
Example:
Suppose the
vacancy in the office KMP arises on 25,July,2018 then Board shall fill up the
vacancy till 26,January, 2019 as per sub section (4)
Sub section(5) of section 203: If any company makes any default in complying with the
provisions of this section, such company shall be liable to a penalty of five
lakh rupees and every director and key managerial personnel of the company who
is in default shall be liable to a penalty of fifty thousand rupees and where
the default is a continuing one, with a further penalty of one thousand rupees
for each day after the first during which such default continues but not
exceeding five lakh rupees.
Note:
Suppose if a
Default is been committed under this section KMP & Director shall be liable
to pay fine of fifty thousand rupees and if it’s a continuing one then from the
second day of the default they will be liable to pay one thousand for each day
till it continues up to maximum of five lakh rupees.
Roles and Responsibility of KMP:
Key
Management Personnel has been vested with a huge responsibility of being liable
for any non-compliance with the provisions of the Companies Act, 2013. The
management function of implementing important decisions comes under the
responsibilities of Key Management Personnel. The future of a company depends
on the effectiveness of its Key Management Personnel and the consequences of
KMP’s errors could impact the company negatively.
Register:
Every Company
shall keep at its registered office a register of its Directors and Key
Managerial Personnel containing their full particular, In addition to the
details of the directors or key managerial personnel, the company shall also
include in the aforesaid Register the details of securities held by them in the
company, its holding company, subsidiaries, associates of the company, as per
Rule 17 of Companies (Appointment and Qualification of Director) Rule, 2014.
Procedure for appointment of a KMP:
1. Advertise
the post, collect applications, hold interview, short list the individuals for
the position, and finalise the terms of appointment.
2. Convene a
Board meeting after giving notice to all the directors of the company as per
section 173 of the Act. At the board meeting, place the proposal of appointing
KMP with the details of the person finalized and pass a resolution with such
terms and conditions as may be prescribed.
3. File
return of appointment of KMP with the Registrar in Form MR.1 within thirty days from the date of
appointment.
4. File
DIR-12 (Particulars of appointment of Key Managerial Personnel and changes
among them) along with the fee prescribed.
5. The particulars
of KMP, Income-tax PAN, residential details, date of appointment, e-mail ID of
the person for communication purpose are required to be filled in the Form.
6. Make
entries in the Register of directors and key managerial personnel under Section
170 of the Act.
7. Inform the Stock Exchange where the company
is listed.
In Case of listed Company:
As per Regulation
6 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015
(1) A listed
entity shall appoint a qualified company secretary as the compliance officer.
(2) The
compliance officer of the listed entity shall be responsible for –
(a) Ensuring
conformity with the regulatory provisions applicable to the listed entity in
letter and spirit.
(b) Co-ordination
with and reporting to the Board, recognized stock exchange and depositories
with respect to compliance with rules regulations and other directives of these
authorities in manner as specified from time to time.
(c) Ensuring
that the correct procedures have been followed that would result in the
correctness, authenticity and comprehensiveness of the information, statements
and reports filed by the listed entity under these regulations.
(d) Monitoring
email address of grievance redressal division as designated by the listed
entity for the purpose
of registering complaints by investors:
SPECIMEN OF BOARD RESOLUTION
APPOINTING KMP
RESOLVED
THAT Pursuant to section 203 of the
companies act, 2013 read with rule 8 & 8A of the companies (appointment and
Remuneration of managerial personnel) rule, 2014 Mr,.......................................,
had ....... years’ experience in a listed company, be and is hereby appointed
as KMP on the terms and conditions contained in the letter of appointment,
draft whereof was laid on the table of the meeting, approved by the meeting and
initialled by the chairman of the meeting as a mark of identification;
RESOLVED FURTHER THAT the chairman and managing
director of the company, ............... be and is hereby authorised to sign
the letter of appointment of the KMP, on behalf of the Board of directors of
the company.
RESOLVED
FURTHER THAT .................., be and is hereby appointed as a KMP on the following terms and conditions:
(a) Salary...............Rs. ..............
per month in the pay scale of Rs. ................
(b) Other allowances ................. Rs.
................ per month.
(c)
Company’s leased accommodation for residential purpose.
(d) Company’s car with driver for company’s
work.
(e) One
Mobile and one telephone line at his residence at company’s cost for company’s
work. Long distance personal calls will be payable by him.
(f) Leave as
per company’s leave rules.
(g)
Provident Fund Contribution as per company’s rules.
(h)
Superannuation Fund Contribution as per company’s rules.
(i) Gratuity as per rules of the Company.
(j) Leave
encashment as per company’s rules.
(k) Determination
of service on three month notice by either party.
Name: Signature:
Place:
ABOUT THE AUTHOR
VICKY THAPA
Commerce Graduate and Pursuing Company Secretaryship
Commerce Graduate and Pursuing Company Secretaryship
Contact - thapa.vicky08@gmail.com
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