Oct 2014 24th October`14

 (a) To every Listed Company
(b) Every Public Company with paid up share capital of
Rs. 10 Crore or more
(Section 203 read with Rule 8 of Companies
Personnel] Rules, 2014)
 Applicability shall extend also to Private Company
which is a subsidiary of a Public Company.
 Paid up Share Capital – u/s 2[64] refers to an
aggregation of money credited as paid up. Hence
includes preference capital also.
Is applicability of Section 203 prospective?
No. Appointment of KMP is mandatory from April 1, 2014.
Clear from Second proviso to Section 203[3] which says:
“Provided that whole time KMP holding office in more than
one Company at the same time on the date of
commencement of this Act, shall, within a period of six
months from such commencement, choose one Company in
which he wishes to continue to hold the office of KMP”.
Approach of MCA to contraventions by Companies post April
1, 2014 to be seen.
Position of persons occupying office of CS, MD, prior to
As there was no concept of KMPs under old Act, these
persons have to be appointed by Board as KMPs immediately
after 01.04.2014. Prior to appointment, Nomination
Committee to recommend .
KMP defined u/s 2[51] means :
The Chief Executive Officer or the Managing Director or the Manager
The Company Secretary
The whole-time director
The Chief Financial Officer and
Such other officer as may be prescribed.
Residuary Clause not yet extended through Rules.
Does CEO have to be a Director?
No Section 2[18] defines CEO “An officer of the Company who has been
designated as such by it.”
Hence remuneration of CEO (if not part of Board), Company Secretary
and CFO not subject to regulation under Section 197 read with Schedule
Status of Company Secretary
Vide Notification dated June 9, 2014 MCA have mandated appointment
of CS in Private Companies with Capital above Rs. 5 Crore. However he
will not be a KMP.
Can chairman of Board be MD or CEO ?
No. Except in case of Companies with a Capital of Rs. 100 Crore and
turnover of Rs. 1000 Crore with multiple lines of Business which has
appointed CEOs for such lines or
(i) Where the Articles provide for such appointment
In line with philosophy followed in the West.
Can same person hold dual positions?
No express prohibition as per the Act
Section 203[3] contemplates same person holding position as KMP
in Subsidiary also.
Third proviso u/s 203[3] contemplates same person being appointed
MD in two Companies with unanimous consent of the Board of other
Precedence available when Section 383A was introduced in 1975 in
old Act.
KMP to be appointed only at meeting of Board and not
through circulation or by committee
KMPs functioning as Directors in other Companies should
seek approval of Board for continuance.
KMP in two Companies
 Second proviso to Section 203[3] – persons holding
positions in two Companies to abdicate for one Company
within six months of the Act.
 MD of one Company can be MD in another.
 Flaw in drafting of Section 203[3] –
Should have stated “subject to third proviso hereunder”.
Vacancy in office of KMP
To be filled up in six months
 Penalty for Non Compliance
 Fine up to Rs. 5 lakh
 Every Director & KMP liable for fine upto Rs.
50,000/ Continuing Offence – Penalty Rs. 1000 per day.
 Obvious flaws in the law:
 A)Exemption to private Companies even with Capital
above Rs 10 Crore.-Strange!
 B)No provision regarding educational qualifications
for CFO-Weird!!!
Thank You

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