Specified class of companies are required to appoint managerial personnel (Managing Director, Whole time director, Manager, etc.) / key managerial personnel (KMP)(Managing Director / Chief Executive Officer, Chief Financial Officer, Company Secretary, etc.) The managerial personnel / KMPs are involved in the key decision making process of a company. The webinar covers the aspects of statutory provisions involved in the appointment and qualification of managerial personnel / KMPs, their roles and responsibilities, statutory compliances and judicial precedents.

1. Appointment and qualification of Managerial
Personnel / Key Managerial Personnel
CS Meenakshi Jayaraman

2. Credits and Acknowledgments
Sundar Rajan S

3. Legends used in the Presentation
Act Companies Act, 2013
Board/ BOD Board of Directors
CEO Chief Executive Officer
CG Central Government
CS Company Secretary
KMP Key Managerial Personnel
MD Managing Director
ROC Registrar of Companies
SEZ Special Economic Zones
WTD Whole-time Director

4. Presentation Schema
Meaning of relevant
terms
Difference between
MD and Manager
Appointment of
managerial
personnel
Procedure for
appointment
Exceptions Part-I of Schedule V
ROC filing
requirements
Appointment of
KMP
Contravention
Functions of
Company Secretary
Caveats Judicial Precedents

5. Meaning of relevant terms
1. Manager – Section 2(53) of the Companies Act, 2013
Manager means an individual who, subject to the superintendence, control and direction of
the Board
has the management of the whole, or substantially the whole, of the affairs of a
Company,
and includes a director or any other person occupying the position of a manager, by
whatever name called, whether under a contract of service or not

6. Contd.
Managing Director means a
director who, by virtue of
Company’s AOA or an
agreement with the
Company or a resolution
passed by the Company in
Board/ General Meeting
is entrusted with substantial
powers of management of
the affairs of the company
and includes a director
occupying the position of
managing director, by
whatever name called
2. Managing Director – Section 2(54) of the Companies Act, 2013
3. Whole-time Director – Section 2(94) of the Companies Act, 2013
Whole-time director includes a director in the whole-time employment of the Company

7. Contd.
4. Key Managerial Personnel – Section 2(51) of the Companies Act, 2013
Key managerial personnel, in relation to a Company, means:
1. CEO or the MD or the manager
2. Company Secretary
3. Whole-time director and Chief Financial Officer
4. such other officer, not more than one level below the directors who is in
whole-time employment, designated as KMP by the Board
5. such other officer as may be prescribed

8. Difference between MD and Manager
Basis of distinction Managing Director (MD) Manager
Who can be appointed? Only a director An individual. A manager need not be a
director
Control MD is not under the supervision and
control of the BOD
Manager is under the supervision and
control of the BOD
Powers Extends to whole of the Company Restricted to the particular department
under which he/she is appointed or
entrusted to act
Position MD is placed in the top level of an
organisation (Board)
Manager is a paid employee of an
organisation. He/she forms the middle
level in the hierarchy
Function Formulation of plans and policies Implementation of plans and policies
Accountability MD is accountable to stakeholders of
the Company
Manager is accountable to Board of the
Company

9. Appointment of managerial personnel – Section
196(1) and (2) of the Act
Managerial personnel shall mean MD, WTD or a manager
Company shall not appoint or employ at the same time a managing director and a manager – Section 196(1)
Company shall appoint or re-appoint any person as its MD, WTD or a manager for a term not exceeding 5 years
at a time. Also, re-appointment shall not be made earlier than one year before the expiry of his/her term –
Section 196(2)

10. Who cannot be appointed as managerial
personnel?
Person below the age of 21
years or has attained the age
of 70 years*
Person who is undischarged
insolvent or has at any time
been adjudged as an insolvent
Person who has at any time
suspended payment to his
creditors or makes, or has at
any time made, a composition
with them
Person who has at any time
been convicted by a court of
an offence and sentenced for
a period of > 6 months
•*Persons who have attained the age of 70 years may be appointed when,
• Special resolution is passed in general meeting
• Notice containing explanatory statement shall specify the justifications for appointing such person
•However, if special resolution is not passed, the appointment may still be made valid, if
• Ordinary resolution is being passed in the general meeting and
• Application has been made by the Board to the CG for appointing such person and the same has been approved by the CG

11. Procedure for appointment – Section 196 (4) and
(5) of the Act
Managerial personnel shall
be appointed subject to
the provisions of Section
197 and Schedule-V of the
Act
Terms and conditions of
such appointment and
remuneration payable shall
be approved by the Board
at their meeting
Also, the same shall be
approved by a resolution
at the next general
meeting of the Company
Also, the same shall be
approved by the CG in case
such appointment is at
variance to the
conditions specified in Part
I of Schedule-V
Notice convening Board or general meeting for considering such appointment shall include the terms and conditions of such
appointment, remuneration payable and such other matters including interest, of a director or directors in such appointments, if any
Where an appointment of a managerial personnel is not approved by the Company at a general meeting, any act done by him/her
before such approval shall not be deemed to be invalid – Section 196(5)

12. Exceptions
The following Companies are exempted from complying with certain provisions of the Act as specified below:
• Section 196(4) – Procedure for appointment
• Section 196(5) – Act(s) done before appointment in general meeting
Private Company
• Section 196(2) – Term of appointment and re-appointment
• Section 196(4) – Procedure for appointment
• Section 196(5) – Act(s) done before appointment in general meeting
Government Company
• Section 196(4) – Procedure for appointmentSpecified IFSC Public
Company

13. Part-I of Schedule V of the Act
Conditions specified under Part-I of this Schedule should be satisfied for appointing a managerial personnel of the Company
If not, then such person shall be appointed only after obtaining approval from the CG in the prescribed manner
1. Person had not been sentenced to imprisonment for any period, or to a fine > Rs. 1000, for the conviction of an offence under
any of the following Acts:
• Indian Stamp Act, 1899
•Central Excise Act, 1944
•Industries (Development and Regulation) Act, 1951
•Prevention of Food Adulteration Act, 1954
•Essential Commodities Act, 1955
•Companies Act,2013
•Securities Contracts (Regulation) Act, 1956
•Wealth-tax Act, 1957
•Income-tax Act, 1961
•Customs Act, 1962
•Competition Act, 2002
•Foreign Exchange Management Act, 1999
•Sick Industrial Companies (Special Provisions) Act, 1985
•Securities and Exchange Board of India Act, 1992
•Foreign Trade (Development and Regulation) Act, 1922
•Prevention of Money-Laundering Act, 2002
•Insolvency and Bankruptcy Code, 2016
•Goods and Services Tax Act,2017
•Fugitive Economic Offenders Act, 2018

14. Contd.
2. Such person had not been detained for any period under the Conservation of Foreign Exchange and Prevention of
Smuggling Activities Act, 1974
Where the CG has given its approval to the
appointment of a person convicted or
detained under any of the above conditions,
no further approval of the CG shall be
necessary for the subsequent appointment
of that person
if he/she had not been so convicted or
detained subsequent to such approval
3. Such person has completed the age of 21 years and has not attained the age of 70 years
Where such person has attained the age of 70 years and where his/her appointment is approved by a special resolution
passed by the Company in general meeting, no further approval of CG shall be necessary for such appointment

15. Contd.
4. Such person is resident of India
•Resident in India includes a person,
•who has been staying in India for a continuous period of atleast 12 months immediately preceding the date
of his appointment as a managerial person AND
•who has come to stay in India,
•for taking up employment in India OR
•for carrying on a business or vacation in India
The above condition shall not apply to the companies in SEZ as notified by Department of Commerce from time to time
•A non-resident shall enter India only after obtaining a proper Employment Visa from the concerned Indian mission abroad
•For this purpose, such person shall be required to furnish, along with the visa application form,
•profile of the Company,
•the principal employer and
•terms and conditions of such person’s appointment

16. ROC filing requirements
Filing of return of appointment
• Appointment of managerial personnel shall
be filed in Form MR-1
• Such Form shall be filed within 60 days of
appointment of managerial personnel
• Form MGT-14 shall be filed within 30 days of
passing special resolution whenever required
(like in case of appointing managerial person
who has attained 70 years)
• Form DIR-12 has to be filed within 30 days of
appointment of managerial personnel
Filing of return for CG approval
(whenever required)
• Return in Form MR-2 has to be filed for
obtaining approval from CG
• Such Form has to be filed within 90 days of
appointment of managerial personnel

17. Appointment of Key Managerial Personnel –
Section 203 of the Act read with Rule 8
Following Companies shall mandatorily appoint whole time KMP:
Every Listed Company Other Public CompanyAND
having a paid-up share capital of >= Rs. 10 crores*
Whole time KMP for the purposes of this Section shall mean all the following persons:
1. MD or CEO or manager and in
their absence, a whole-time
director
2. Company Secretary*
(Rule 8A provides the
requirement for companies not
covered under Rule 8)
3. Chief Financial Officer

18. Conditions
Whole-time KMP shall not hold office in more than one company except in its subsidiary company at the same time
• However such KMP shall be appointed as a director of any Company with the permission of the Board
• A Company may appoint or employ a person as its MD if,
• such person is MD or manager of only one another Company and
• such appointment or employment is made or approved by a resolution passed at Board meeting
with unanimous consent of directors
If the office of any whole-time KMP is vacated, the resulting vacancy shall be filled-up by the Board at their meeting
within a period of 6 months from the date of such vacancy
The above provisions u/s 203 of the Act shall not apply to a Government Company which intends to appoint managerial personnel or a CEO

19. Appointment of whole time CS: Rule 8A
Every Company (other than listed company and public company covered under Rule
8) having paid-up share capital of Rs. 5 Crores or more
Shall have a whole-time Company Secretary
Whole time CS shall mean a Company Secretary other than a practicing Company Secretary

20. Contravention
Contravening the provisions of Section 203 of the Act shall attract the following penalty:
Company Director and KMP in default
Penalty – Rs. 5 lakhs Penalty – Rs. 50,000 +
Rs. 1,000 per day (for continuing default)
Subject to a maximum of Rs. 5 lakhs

21. Functions of Company Secretary
Report to the Board about compliance with the provisions of the Act, the rules made thereunder and other laws applicable to
the Company
Ensure that the Company complies with the applicable secretarial standards
Provide to the directors of the company, collectively and individually, such guidance as they may require, with regard to their
duties, responsibilities and powers
Facilitate the convening of meetings and attend Board, committee and general meetings and maintain the minutes of these
meetings
Obtain approvals from the Board, general meeting, the government and such other authorities as required under the
provisions of the Act
Represent before various regulators, and other authorities under the Act in connection with discharge of various duties under
the Act
Assist and advise the Board in ensuring good corporate governance and in complying with the corporate governance
requirements and best practices

22. Caveats
Appointment of managerial personnel u/s 196(4) of the Act requires only ordinary resolution to be passed at
general meeting. Only in specified circumstances special resolution is required
Only Companies which are exempted u/s 196(4) shall appoint managerial personnel in BOD meeting
Other Companies shall mandatorily appoint managerial personnel by passing resolution in general meeting
Whole time KMP other than managerial personnel shall be appointed by passing resolution in BOD meeting
Form MGT-14 has to be filed in case of appointment of Managing Director irrespective of whether such person is
appointed in Board or General Meeting – Section 117(3)(c)

23. Judicial Precedents
Defendant No.2 was appointed as Chairman and Managing Director ("MD") of the 1st Defendant-Company
On 01-08-2012 the 2nd Defendant was reappointed as Chairman and Managing Director of the 1st Defendant-Company for a period of
further 5 years till 2017
Plaintiff, who is the joint MD of the Company contended that in view of the incorporation of disqualification clause in section 196(3)(a) of
the Act, Defendant No.2 could not continue as MD and, therefore, he has sought an order of injunction, restraining him from functioning
as MD
It was contended by the learned Counsel appearing on behalf of Defendant No.2 that the said amendment could not operate
retrospectively
It was held that, as per the Act, disqualification arises once when the MD who has already been appointed or is proposed to be
appointed, attains the age of 70 years irrespective of whether such person is appointed prior to or after the introduction of the Act
Hence the appeal filed by plaintiff was allowed and the Hon’ble High Court ordered that a special resolution has to be passed for
continuation of Defendant No. 2 as MD of the Company
Sridhar Sundararajan vs. Ultramarine & Pigments Limited – [2016] 66 taxmann.com 167 (Bombay)

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