Key Managerial Personnel (KMP) are the senior executives responsible for day-to-day management of a company. Defined under Section 2(51) and governed by Section 203 of the Companies Act 2013, KMPs hold significant authority and corresponding personal liability.
Who Are KMPs?
Section 2(51) defines KMP to include:
- CEO or MD: Chief Executive Officer or Managing Director
- Company Secretary (CS): Whole-time company secretary
- Chief Financial Officer (CFO): Person managing financial activities
- Whole-Time Director (WTD): Director devoting whole of time to the company
- Manager: Person having management of the whole, or substantially the whole, of the affairs of a company (not MD)
- Such other officer as may be prescribed (Rule 8A of Companies (Appointment) Rules)
Mandatory Appointment Requirements
| KMP Position | Mandatory for | Section |
|---|---|---|
| MD or CEO (one of them) | Listed company, public company with paid-up capital ≥ Rs.10 Cr | 203(1)(i) |
| Company Secretary (whole-time) | Every listed company + every company with paid-up capital ≥ Rs.10 Cr | 203(1)(ii) |
| CFO | Every listed company + company with paid-up capital ≥ Rs.10 Cr | 203(1)(iii) |
Appointment Process
- Board resolution at a board meeting (not by circular resolution — Section 179(3)(k))
- File Form MR-1 (appointment of MD/WTD/Manager) or Form DIR-12 (CS/CFO) with ROC within 30 days
- Disclose in Board Report: remuneration, terms, perquisites
- For MD/WTD/Manager: Board + general meeting approval required (Section 196/197); Remuneration Committee recommendation
Managerial Remuneration Limits (Section 197)
| Category | Limit (% of Net Profit) |
|---|---|
| One MD/WTD/Manager | 5% |
| All MD/WTD/Manager together | 10% |
| All other directors (part-time) | 1% (non-MD directors) |
| All directors combined maximum | 11% |
Exceeding limits: Requires special resolution + approval of Central Government (for listed companies, CG approval not required from 2019 amendment — shareholder resolution sufficient for up to 200% of limits). Recovery of excess from MD/WTD is mandatory.
KMP Disclosures
- Annual Report (Board's Report): Details of remuneration, ratio to median employee salary (Section 197(12) + Rule 5)
- DIR-8: Intimation of interest by KMP
- Declaration under Section 164: KMP (if also director) must declare disqualifications
- Disclosure of shareholding in the company + related party transactions
KMP Personal Liability Under Companies Act
- Section 447: Fraud — minimum 6 months imprisonment up to 10 years; fine 3× amount involved
- Section 448: False statements/omission — same as Section 447
- Section 197(16): If excess remuneration paid, KMP must return the excess within 2 years (failing which listed company must initiate recovery proceedings)
- Section 149(12): Independent directors (not whole-time): liability only for acts where they had knowledge or acted negligently or fraudulently
- SEBI LODR provisions also impose personal liability on CFO for financial statements
Cessation of KMP
- Resignation: effective 30 days after notice or earlier by mutual consent
- ROC intimation: Form MR-1 / DIR-12 within 30 days of cessation
- A vacancy in the office of MD/WTD/Manager must be filled within 6 months (Section 203(4))
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