Key Management Personnel

Key management personnel (KMP) are a group of people mainly CEO, CFO, CS and Managing Director who holds the authority and responsibility of planning and controlling the basic operation of the company.

Under sec 2(51) of the Companies Act, 2014, KMP or Key Management Personnel are the main in charge of maintaining operation. These personnel’s are:

Whole time director

Chief Executing Officer/Manager/Managing Director

Chief Financial Officer (CFO)

Company Secretary (CS)

Any other officer prescribed by the government

Who are all eligible for appointing a KMP?

According to rule 8 of the Companies (Appointment and Remuneration of Managerial Personnel) act 2013, states that it is mandatory for all the listed companies and public companies having share up capital of INR 10 crore to appoint KMP.

In addition to new rule 8(A), all public companies having a paid-up share capital of INR 5 crore has to appoint a Whole Time Company Secretary as KMP mandatorily.

What is the process of appointing KMP?

Section 203 of the companies act, draws some guidelines under which KMP can be appointed:

  1. The board of director needs to pass a special resolution for appointment and remuneration of KMP. If there is a vacancy in the managerial personnel, then it should be filled within six months by the board of directors.
  2. Form DIR-12 and form MGT-14 along with the copy of board resolution to be filed to Roc within 30 days of appointing or making changes in remuneration of KMP
  3. Form MRI to be filed in case of appointing a managing director/ CEO/ manager within 60 days.

What are the roles and responsibilities of KMP?

The KMP’s are solely responsible for taking the important decisions and managing all the employees in the company. The growth and development of the company depend on the effective working of the KMP. The main responsibilities and functions of the KMP are:

  • According to Section 170 of the Companies Act, details regarding the securities vested by the KMPs in the company or any of its holdings or subsidiaries must be disclosed and thus recorded in the Registrar.
  • KMP’s only have a right to voice their opinion especially in meetings of the Audit Committee, but they do not hold any voting right.
  • According to Section 189, Companies Act, KMPs if having interest in other companies and associations, should disclose at least within 30 days of the start of the employment period.

What is the penalty for not complying with the KMP?

Violating the provision of sec 203, will lead to

  1. The company would be held punishable with a fine from INR 1 Lack to INR 5 lacks.
  2. Any person in KMP who is at default may be charged with a fine of upto INR 50,000.
  3. If the violation continues then a fine of INR 1000 is charged for every single day till the time it is resolved.

What are the restrictions regarding the appointment of KMP?

It has been rendered under the Act that the role or designated Chairman and Managing Director or Chairman and Chief Executive Officer should not be given to the same person

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

  1. if the article contains a provision for reappointing the same person
  2. the company has only a single business
  3. the company is involved with multiple businesses and has appointed different CEO’s for different businesses.
  4. A whole time KMP cannot hold an office in any other company at the same time.

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