LCI Learning

Share on Facebook

Share on Twitter

Share on LinkedIn

Share on Email

Share More

Key Managerial Personnel

GP SAHI
Last updated: 18 November 2014
     Share   Bookmark


JJ Irani Committee in its report dated 31st May’ 2005 recommended constitution by the Stakeholders / Board of certain Key Managerial Personnel for formulation and execution of policies and to outside independent professionals for independent assurances on various compliances.  The Committee felt it desirable to dwell on such managerial personnel who have a significant role to play in the conduct of affairs of the company and determine the quality of its Governance.  The Committee was of the view that such Key Managerial Personnel may be recognized by the law, along with their liability in appropriate aspects of company operation.

 

1. Key Managerial Personnel {“KMP”} is defined in Section 2(51) of the Companies Act’ 2013.  It reads as “Key Managerial Personnel”, in relation to a company, means:

 

i)  The Chief Executive Officer or

The Managing Director or

The Manager;

 

ii) The Company Secretary;

iii) The Whole Time Director;

iv) The Chief Finance Officer; and

v) Such other officer as may be prescribed;

 

1.1 As per Section 203 of the Companies Act’ 2013 read with the Companies {Appointment and Remuneration of Managerial Personnel} Rules’ 2014, the following class of companies, namely

 

1.1.1  Every listed company, and

 

1.1.2  Every other Public Company having paid up share capital of Rs. 10 crores or more shall have whole-time key managerial personnel.

 

1.2 Further, as per recently notified Rule 8A of the Companies {Appointment and Remuneration of Managerial Personnel} Rules’ 2014, a company other than a company which is required to appoint a whole time key managerial personnel and which is having paid up share capital of Rs. 5 crores or more shall have a whole time Company Secretary.

 

2. MANNER OF APPOINTMENT OF KMP

 

2.1  Every Whole Time Key Managerial Personnel of a company shall be appointed by means of a resolution of the Board containing the terms and conditions of the appointment including the remuneration.

 

2.2  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 a period of 6 months from the date of such vacancy.

 

3.  RESTRICTIONS REGARDING APPOINTMENT OF KMP

 

3.1  Same individual not to act as Chairman and MD / CEO

 

It has been provided under the Act that the role or designation of Chairman and Managing Director or Chairman and Chief Executive Officer should not be assigned to the same person. In other words, the same person should not act as both Chairman and Managing Director or Chief Executive Officer of the Company.

 

However, the above restriction will not apply in following circumstances.

 

a. Articles of the company contain provision for appointment of same person, or

b. Company carries only a single business, or

c. Company is engaged in multiple businesses and has appointed one or more Chief Executive Officers for each such business as may be notified by the Central Government.

 

3.2   Whole Time KMP not to hold office in more than one Company

 

A whole-time key managerial personnel shall not hold office in more than one company at the same time, except:

 

- In the company’s subsidiary company,

- As a director in any other company with the permission of the Board.

- As a Managing Director, if he is the managing director or manager of one and of not more than one other company and such appointment is approved by a resolution passed at a meeting of the Board with the consent of all the directors present at the meeting and of which meeting.

 

A whole-time key managerial personnel holding office in more than one company at the same time on the date of commencement of this Act, shall, within a period of six months from such commencement choose one company, in which he wishes to continue to hold the office of key managerial personnel.

 

4. OTHER PROVISIONS REGARDING KMP

 

a.  A KMP is included within the meaning of “Officer in Default” under the Act.

b.  A KMP or his relative is a related party within the meaning of Section 2(76) of the Act.

c.  A document or proceeding or contracts requiring authentication by or on behalf of a company, may be signed by any key managerial personnel or an officer of the company duly authorized by the Board in this behalf.

d.  Details regarding KMP, changes therein and the remuneration paid to them are required to be disclosed in the Annual Return of the Company.

e. The explanatory statement should disclose the nature of concern or interest, financial or otherwise, of every key managerial personnel, in respect of each items of special business to be transacted at a general meeting.

f. The explanatory statement shall where any item of special business to be transacted at a meeting of the Company relates to or affects any other company state the extent of shareholding interest in that other company of every key managerial personnel of the first mentioned company if it exceeds two per cent of the paid up share capital of that company.

g. A person whose relative is employed as a KMP in a company is disqualified to be appointed as auditor in that company.

h.  A person is disqualified to be appointed as an independent director if he either himself or through his relative holds or has held the position of a key managerial personnel of the company or its holding subsidiary or associate company in any of the three financial years immediately preceding the financial year in which he is proposed to be appointed.

i. Company is required to maintain a register of the KMPs at its registered office containing particular which shall include the details of securities held by each of them in the company or its holding, subsidiary, fellow subsidiary or associate companies.

j.  A return of every appointment and change in KMP has to be filed with the ROC within 30 days of the appointment or the change as the case may be.

k.  The key managerial personnel shall have a right to be heard in the meetings of the Audit Committee when it considers the auditor’s report but shall not have the right to vote.

l. The Nomination and Remuneration Committee shall formulate the criteria for determining a policy, relating to the remuneration of key Managerial personnel.  It shall ensure a balance between fixed and incentive pay reflecting short and long-term performance objectives appropriate to the working of the company and its goals.  Such policy shall be disclosed in the Board’s report.

m.  Every key managerial personnel shall, within a period of 30 days of his appointment, or relinquishment of his office, as the case may be, disclose to the company the particular specified in Section 184 relating to his concern or interest in the other associations which are required to be included in the register or such other information relating to himself as may be prescribed.

n. Key Managerial Personnel are prohibited to make forward dealings and insider trading in securities of the Company.


"Loved reading this piece by GP SAHI?
Join LAWyersClubIndia's network for daily News Updates, Judgment Summaries, Articles, Forum Threads, Online Law Courses, and MUCH MORE!!"






Tags :


Category Others, Other Articles by - GP SAHI 



Comments


update