Appointment and qualification of managerial personnel or key managerial personnel

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

5. Meaning of relevant terms 1. Manager – Section 2(53) of the Companies Act, 2013

6. Contd. 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

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

10. Who cannot be appointed as managerial personnel? *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 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 :

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 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

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 Company AND 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:

18. Conditions 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 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

22. Caveats

23. Judicial Precedents Sridhar Sundararajan vs. Ultramarine & Pigments Limited – [2016] 66 taxmann.com 167 (Bombay)

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