KEY MANAGERIAL PERSON

UNDER COMPANIES ACT,

2013
KEY MANAGRIAL PERSON UNDER COMPANIES
ACT, 2013
• The term ‘personnel’ refers to a group of people working
together, instead of one person. The Key Managerial
Personnel are the decision makers. They are accountable for
the smooth functioning of company operations.
• The Board of Directors sets goals and objectives for the
company. The key managerial personnel are the one who
actually works on these goals and objectives to be achieved.
• Under Section 2 of the Companies Act 2013, Key Managerial
Personnel in reference to a company are as follows:
• Chief Executive Officer
• Chief Financial Officer
• Company Secretary
• Manager
• Managing Director
• Whole-time Director
 APPOINTMENT OF KEY MANAGERIAL
PERSONEL
• Section 203 of the Act with the Rule 8 of the Companies
(Appointment and Remuneration of Managerial Personnel) Rules,
2014.
• Maintenance of register.
• Procedure for appointing a KMP:
• Section 160 and 152.
• Section 179 (3).
• Section 203.
• Section 196.
• Central government approval.
• Filling up vacancy.
RESTRICTIONS REGARDING APPOINTMENT OF
KMP
• Holding of office in multiple companies.
• Same person cannot act as chairman and MD/CEO.
 RENUMERATION OF KMP
• As per Section 2(78), Remuneration means any money or its
equivalent given or passed to any person for services rendered for
him and includes perquisites as defined under Income Tax Act, 1961.
• Section 197 of the Companies Act, 2013, prescribed the maximum
ceiling for payment of managerial remuneration which shall not
exceed 11% of the net profit of the company in that financial year.
• The remuneration payable to any one managing director or whole-
time director or manager shall not exceed 5% of the net profits of the
company and if there are more than one such director remuneration
shall not exceed 10% of the net profits to all such directors and
manager taken together.
 ROLE AND RESPONSIBILTIES OF KMP
• As per section 102 of the Act, any interest or concern of KMP on a
proposed matter to be transacted at the meeting shall be disclosed by
KMP.
• As per Section 170 of the Act, the details of securities held by KMP in the
company or its holding, subsidiary, a subsidiary of the company or
associated companies should be disclosed and recorded in the Registrar of
the Books.
• Key Management Personnel has a right to be heard in the meetings of the
Audit Committee while considering the auditor’s report. However, they do
not have the right to vote.
• According to Section 189(2), KMP should disclose to the company, within
30 days of appointment, relating to their concern or interest in the other
associations, which are required to be included in the register.
• KMP shall not deal in securities of the Company as per Section 194 of the
Act.
• To provide to the directors of the company, collectively and individually,
such guidance as they may require, with regard to their duties,
responsibilities and powers.
• To facilitate the convening of meetings and attend Board, committee and
general meetings and maintain the minutes of these meeting.
• To obtain approvals from the Board, general meeting, the government and
such other authorities as required under the provisions of the Act.
• To represent before various regulators, and other authorities under the Act
in connection with discharge of various duties under the Act.
• To assist the Board in the conduct of the affairs of the company.
• To assist and advise the Board in ensuring good corporate governance and
in complying with the corporate governance requirements and best
practices.
• To discharge such other duties as have been specified under the Act or
rules.
 CONCLUSION
• It is evident that the new Act vide this concept seeks to ensure proper
allocation of responsibilities amongst the decisive minds of a
company and also to make them accountable in case of any defaults
or non-compliances committed by company in the course of business.
Thus, under the new regime, the KMP are expected to be highly
diligent which in turn would enhance the level of professionalism and
would ultimately be helpful in gaining the faith of the
shareholders/stakeholders of companies.