Appointment of KMP in Two Companies - 443
Appointment of KMP in Two Companies
A. SHORT SUMMARY:
The purpose behind this editorial,
to understand the concept of ‘Key
Managerial Personnel” Process of appointment, appointment in another
Companies, appointment in Subsidiaries, forms required to file for such
appointment etc. To discuss following frequent questions:
A.
Whether a CS of holding Company can appoint CS in
Subsidiary or subsidiaries?
B.
Whether a person can appoint two positions as MD and CFO or
any other combination?
C.
Whether a KMP can appoint as Director in any other Companies?
First: - Persons Includes – KMP
Every
company belonging to such class or classes of companies as may be
prescribed shall have
the following whole-time key managerial personnel,—
(i) Managing Director, or Chief Executive Officer or Manager
and in their absence, a whole-time director;
(ii) Company Secretary; and
(iii) Chief Financial Officer:
Second: - Single person can appoint
as MD and CFO or any other combo:
It
is no where restricted under Act for appointment of MD as CFO or CS as CEO or
CFO as CEO or any other combinations
As per Definition of KMP and Section 203(1): Every company falls
in limit of Section 203 need to appoint Whole Time Key managerial Personnel’s
in three positions.
One can opine that:
Company
required separate person for each category. Therefore, there should be at least
3 separate people to comply with provisions of Section 203(1).
If in the given example MD also appointed as CFO, still he
will be counted at only one category of KMP whether as MD or CFO. Company
requires appointing at least 3 person for all three categories.
Second: - Appointment of Company
Secretary in Subsidiary Company:
As
per Companies Act, 2013 Company Secretary shall be considered as Whole Time Key
Managerial Personnel of Company.
If
a person is whole time employee in any company he can’t appoint as whole time
employee in any other Company. Therefore, a CS can’t get appointment as CS in
any other Company. Except
As
per Section 203(3)(a) A whole-time key managerial personnel shall not hold
office in more than one company except
in its subsidiary company at the same time.
One can opine that:
As
per section 203(3)(a), a KMP can be appoint as KMP in its Subsidiary Company.
Therefore, Company can file DIR-12 in subsidiary company also for appointment
of CS of Holding Company in subsidiary Company.
However, as per Act KMP of holding Company can be appointing
as KMP in subsidiaries. Because in act language used word singular i.e.
“Subsidiary”. As per CLC Report 2016 singular includes Plural also for the
purpose of Section 203.
Third: - Appointment of KMP as Director in Another Company
As per Companies Act, 2013, Section 203(3) Provided that
nothing contained in this sub-section shall disentitle a key managerial
personnel from being a director of any company with the permission of the Board.
One can opine that:
A
KMP can be appointing as Director in any other Company subject to approval of
Board of Directors.
Legally KMP is Whole time Employee of Company therefore, KMP
can appoint only as Non-executive Director in any other Company.
Author – CS Divesh Goyal, GOYAL DIVESH & ASSOCIATES
Company Secretary in Practice from Delhi and can be contacted at csdiveshgoyal@gmail.com).
Disclaimer: The entire contents of this
document have been prepared on the basis of relevant provisions and as per the
information existing at the time of the preparation. Although care has been
taken to ensure the accuracy, completeness and reliability of the information
provided, I assume no responsibility therefore. Users of this information are
expected to refer to the relevant existing provisions of applicable Laws. The
user of the information agrees that the information is not a professional
advice and is subject to change without notice. I assume no responsibility for
the consequences of use of such information. IN NO EVENT SHALL I SHALL BE
LIABLE FOR ANY DIRECT, INDIRECT, SPECIAL OR INCIDENTAL DAMAGE RESULTING FROM,
ARISING OUT OF OR IN CONNECTION WITH THE USE OF THE INFORMATION
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