I. INTRODUCTION

The Companies Act, 2013 has for the first time recognized the concept of Key Managerial Personnel (KMP). While the Board of Directors are responsible for providing the oversight, it is the key managerial personnel who are responsible for not just laying down the strategies but also its implementation. “Company Secretary” has also been brought within the ambit of Key Managerial Personnel giving them the long-deserved recognition of a Key Managerial Personnel of the Company.

II. DEFINITION OF KEY MANAGERIAL PERSONNEL (KMP IN COMPANY)
As per Section 2(51) of Companies Act, 2016 “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 Financial Officer; and
such other officer as may be prescribed. III. WHICH COMPANIES ARE REQUIRED TO APPOINT KEY MANAGERIAL PERSONNEL?

As per Section 203(1) of Companies Act, 2013 read with Rule 8 of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014:
1. Every listed company; and
2. Every other public company having paid-up share capital of 10 crore or more
is under the obligation to to appoint certain whole-time key managerial personnel.

Now, these whole-time key managerial personnel include:
i. Managing Director (MD) or Chief Executive Officer (CEO) or Manager
(in case none of them is appointed then a whole-time director has to be appointed as KMP)
ii. Company Secretary; and
iii. Chief Financial Officer.
Appointment of all the three whole time key managerial personnel (KMP) above is not mutually exclusive but concurrent in nature.

Apart from above, Rule 8A of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 further states that:

“Every company other than a company covered under Rule 8 above be it public or private, listed or unlisted is required to appoint a whole-time company secretary, if such company has a paid up share capital of Rs. 5 crore or more”. IV. PROCEDURE OF APPOINTMENT OF KEY MANAGERIAL PERSONNEL (KMP)

Now that we have understood the meaning of the term ‘KMP’ and which companies are required to appoint KMP, the next process of moving forward is to understand how the appointment of these top-notch managerial personnel can be made into the company.

1. Hold the Board Meeting in consideration with appointment of key managerial personnel and pass the Board Resolution containing terms and conditions of the appointment including details of remuneration purposed to be awarded to the KMP in Company. [Section 203(2)].

2. A whole time key managerial personnel shall not hold office in more than one company except in its subsidiary at the same time. [Section 203(3)]

3. A company may appoint or employ a person as its managing director, if he is the managing director or manager of one, and not more than one, other company and such appointment or employment is made or approved by a resolution passed at the meeting of the board with the consent of all the directors present at the meeting and of which meeting, and of the resolution to be moved thereat, specific notice has been given to all the directors then in India. [Section 203(3) Proviso]

4. If the office of any whole-time key managerial personnel (KMP in company) is vacated, then such vacancy must be filled-up by the Board of Directors within a period of 6 months. [Section 203(4)]

5.Subsequent to the appointment of key managerial personnel (KMP in Company), the Company must file ‘FORM MGT-14’ and a return of appointment of the managing director or manager or whole time director in the Form MR-1 with the respective Registrar of Companies. [Section 117 of CA, 2016 read with Rule 3 of Companies (Appointment and Remuneration of Managerial Personnel) Rules,2014]

6. Thereafter the company must file DIR-12 along with prescribes fees in Companies (Registration of Offices and Fees) Rules, 2014. [Rule 17 Of Companies (Incorporation) Rules] V. KEY MANAGERIAL PERSONNEL (KMP) IN GOVERNMENT COMPANY

According to Section 203 (4A):
“The provisions of sub-sections (1), (2), (3) and (4) of section 203 shall not apply to a managing director or Chief Executive Officer or manager and in their absence, a whole-time director of the Government Company.” VI. PENAL PROVISIONS FOR FAILURE TO APPOINT KEY MANAGERIAL PERSONNEL (KMP IN COMPANY)

If any company makes any default in complying with the provisions of Section 203 related to appointment of KMP in Company, then

1. Company shall be liable to a penalty of 5 Lakh Rupees; AND
2. Every Director and Key Managerial Personnel of the Company who is in default shall be liable to a penalty of Rs. 50,000

In case, the default is continuing in nature, then a further penalty of Rs. 1,000/- for each day after the first during which such default continues but not exceeding 5 Lakh Rupees.