Appointment Remuneration Managerial Personnel Rule 2016

Narendra Kumar

30 Nov, 2020

The Companies Act, 2013^[1] has used term key management personnel (KMP) to define executive management. The KMP (key management personnel) is the point of the first contact between the company & its stakeholders.

The Companies Act, 2013 .r.w. Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 deals with the legal & procedural aspects of appointment of Key Managerial Personnel (KMP) consisting of Managing Director, Whole-time Director or Manager, managerial remuneration, secretarial audit, etc

Key Managerial Personnel

The Companies Act, 2013 for the first time acknowledged the concept of Key Managerial Personnel (KMP). To say “key managerial personnel simply means &incudes—

1. The Chief Executive Officer (CEO) or the managing director (MD) or the manager;
2. The company secretary (CS);
3. The whole-time director (WTD);
4. The Chief Financial Officer (CFO); and
5. Such other officer as may be prescribed.

Appointment of Key Managerial Personnel

As per the Companies Act, 2013 makes it compulsory to the appointment the Key Managerial Personnel (KMP) & makes it compulsory for all the listed company & every other public company having a paid-up share capital of Rs.1000,00,000 or more, to appoint the following (WT)whole-time key managerial personnel:

1. Managing director, or Chief Executive Officer or manager and in their absence, a whole-time director;
2. Company Secretary; &
3. Chief Financial Officer:

Every single whole-time key managerial personnel (KMP) of the company shall be appointed by means of the resolution of Board containing the terms & conditions of appointment comprising with the remuneration.

An individual shall be appointed or reappointed as the Chairperson of the company, as well as the managing director (MD) or Chief Executive Officer (CEO) of a company at the same time unless articles of such a company provide otherwise; or a company does not carry several businesses. However, the class of companies that are engaged in numerous businesses & which have appointed 1 or more than one Chief Executive Officers(CEO) for every such business as may be notified by the Central Government is exempted from the above review.

The whole-time key managerial personnel could not hold office in more than 1 company excluding in its subsidiary company at the same time. Though, he can hold such other directorship with the prior permission of the Board.

The whole-time key managerial personnel (KMP’s) who are holding office in more than one company at the same time, then they will have to within a period of 6 months from such initiation of the office, choose any 1 company, in which he wishes to continue to hold office as a key managerial personnel.

A company or entity may appoint or employ any person as its managing director (MD), in case he is already managing director or manager of one, & of not more than one, other company & such appointment or employment is made or be approved by the resolution passed at the meeting of the Board with consent of all directors present at meeting & of which meeting, & of the resolution to be passed thereat, specific notice has to be given to all the directors who are in India.

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Also, Read: Types of Board of Directors As Per The Companies Act 2013.