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Kmp in case of private companies

madhur arora (student) (57 Points)

19 April 2019

If a private company appoints managing director,

Will it fall under the category of KMP?

Or it will be the disretion of the company to designate him/her as kmp..?

If so, then will the company be required to file MR 1 with ROC ?

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6 Replies

sakshay (bacha) (72 Points)
Replied 19 April 2019

no, u need to pass a board resolution to cover him under tge category of KMP

Jatin Bajaj (CS) (2928 Points)
Replied 19 April 2019

As per Section 2(51) of Companies Act 2013, Managing Director is covered under the defination of Key Managerial Personnel. But as per the provisions of Section 2013 of the Companies Act 2013, every public Company having paid up share capital of 10 crore rupee or more shall have the whole time KMP but as the managing Director is covered under the defination of KMP so you need to appoint him as KMP in the board meeting by passing the Board resolution as per the provisions of Section 203(2) of the Companies Act 2013

madhur arora (student) (57 Points)
Replied 19 April 2019

Sir, my confusion is:- As per the provisions of section 203, private companies are not required to appoint whole time kmp inter alia managing director.. But, if a private company voluntarily appoints a managing director.. Then, will the managing director be KMP automatically as per Section 2(51) and fall under the various requirements of the act like section 170 and section 2(60) i.e., officer in default..?

Jatin Bajaj (CS) (2928 Points)
Replied 20 April 2019

Managing Directors are governed as the Key Managerial Personnel as per the provisions of Section 2(51) of the Companies Act 2013 and Section 203 of the Companies, defines the type of Companies to which the provision of Key Managerial Personnel.

But if the Company voluntary appoints the Key Managerial Personnel, then it is deemed that managing Director is the Key Managerial personnel of the Company because as per the Section 2 (59) of the Companies Act 2013, Managing Director is the Officer of the Company and the liability of the managing director is governed as per the provisions of Section 2(60) of the Companies Act 2013. So while appointing the managing Director of the Company, it is prominent , not to use the reference of section 203 of the Companies Act 2013.

Srivathsan Rangarajan (Chartered Accountant) (66 Points)
Replied 20 April 2019

When a private limited company volunteers to appoint a Managing Director it is volunteering to comply with the applicable provisions.

Would the objective of law be met if in this case the private Limited company volunteers to appoint to call some one MD and he is not to be treated as MD as per the provisions of the companies Act?

To answer your query MD is vested with substantial powers of management by the AOA, Board Resolution of terms of appointment. Once appointed a MD he is a KMP and bound by the rules applicable to KMP. He is certainly an officer in default in fitting cases by the very nature of his office/appointment regardless of whether the company is private or public.