Key Managerial Personnel (KMP's) and their Remuneration

i)As per clause (1) of Regulation 6 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, a listed company is required to appoint the company secretary to act as ‘Compliance Officer’, who will be responsible for the following –

(a)ensuring conformity with the regulatory provisions applicable to the listed entity in letter and spirit.

(b)co-ordination with and reporting to the Board, recognised stock exchange(s) and depositories with respect to compliance with rules, regulations and other directives of these authorities.

(c)ensuring that the correct procedures have been followed that would result in the correctness, authenticity and comprehensiveness of the information, statements and reports filed by the listed entity.

(d)monitoring email address of grievance redressal division as designated by the listed entity for the purpose of registering complaints by investors.

ii)Company Secretary has been defined as ‘Officer who is in default’ under Section 2(60) of the Companies Act, 2013 along with Managing Director, Manager and Whole time Director etc. Thus, he can be punished in respect of offences under Companies Act, 2013. He may be held liable as Key Managerial Personnel also under various provisions of the Act.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2024, Q. 5(e) (Syllabus 2017).

(i)"Chief Executive Officer" means an officer of company, who has been designated as such by company - section 2(18) of the Companies Act, 2013. "Chief Financial Officer" means a person appointed as the Chief Financial Officer of company - section 2(19) of the Companies Act, 2013. The Companies Act, 2013 does not prohibit appointment of director as CEO or CFO of same company but company has to comply with other provisions of Act (i.e. disclosure of interest, office of profit or place etc.).

Further as per Regulation 77 of Table F, a director can be appointed as Chief Executive Officer, Manager, Company Secretary or Chief Financial Officer of same company. Accordingly, Ram who is the director of Clean Ltd. can be appointed as CEO or CFO in the same company.

(ii)As per section 196(1) of the Companies Act, 2013 a company can appoint either Managing Director or Manager, but not both at the same time. Accordingly, Ram cannot be appointed as Managing Director of Clean Ltd. in case where Shyam is already appointed as a Manager of Clean Ltd. in view of section 196(1) of the Companies Act, 2013.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2022, Q. 5(e) (Syllabus 2017).

As per Section 2(60), "officer who is in default", means any of the following officers of a company, namely: -

a)whole-time director;

b)key managerial personnel;

c)where there is no key managerial personnel, such director or directors as specified by the Board in this behalf and who has or have given consent in writing to the Board to such specification;

d)any person who, under the immediate authority of the Board or any key managerial personnel, is charged with any specified responsibilities;

e)any person in accordance with whose advice the Board of Directors is accustomed to act, other than a professional advisor;

f)every director, who is aware of contravention by virtue of the receipt by him of any proceedings of the Board, or participation in such proceedings without objecting to the same, or where contravention had taken place with his consent or connivance;

g)in respect of the issue or transfer of shares, the share transfer agents, registrars and merchant bankers to the issue or transfer.

Further, as provided in Section 205 of the Companies Act, 2013 the functions of the Company Secretary include to report to the Board about compliance with the provisions of the Companies Act, 2013 and the rules made thereunder and other laws applicable to the company and also to ensure that the company complies with the applicable secretarial standards.

Accordingly, Company Secretary is not the only officer responsible for ensuring compliances under the Companies Act, 2013 for consideration of officer in default as defined under section 2(60) of the Companies Act, 2013.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2019, Q. 1(b) (Old syllabus).

Section 2(24) of the Companies Act, 2013 defines “company secretary “ or “secretary” means a company secretary as defined in clause (c) of sub-section (1) of section 2 of the Company Secretaries Act, 1980 who is appointed by a company to perform the functions of a company secretary under this Act.

According to clause (c) of Sub-section (1) of section 2 of the Company Secretaries Act, 1980, a company secretary means a person who is a member of the Institute of Company Secretaries of India.

Therefore, ‘Company Secretary’ means a person who is a member of the Institute of Company Secretaries of India (ICSI) and who is appointed by a company to perform the function of a company secretary. The functions of company secretary have been detailed in section 205 of the Companies Act, 2013.

(i)No, S cannot be appointed as a company secretary as his name is removed from the register of members by ICSI on 31.12.2018 itself.

(ii)There is no mandatory requirement to appoint company secretary for a company having paid up share capital of less than five crore rupees. No, S cannot be appointed as a company secretary of M Ltd. even if the paid up capital of the company is Rs. 2 crores as his name is removed from the register of members by ICSI. Therefore, appointment of S as Company Secretary is not valid.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2019, Q. 5(e) (Syllabus 2017).

(a)Prakash may be appointed as the Managing Director of Vijay Ltd. subject to the fulfilment of conditions specified in Section 196(3) read with Part I of Schedule V of the Companies Act, 2013, only after the completion of his tenure in the office of Independent Director or upon his resignation from the office of Independent Director before the end of his tenure, since, as per Section 149(6) of the Companies Act, 2013, an Independent Director means a Director other than the Managing Director.

Therefore, Prakash cannot be appointed as Managing Director while he is continuing in the office of Independent Director.

(b)First proviso to Section 203(1) of the Companies Act, 2013 restricts the appointment of a single person as Chairman and Managing Director of a company at the same time, unless, the articles of such a company provide otherwise; or the company does not carry multiple businesses.

However, public companies with paid up share capital of Rs.100 Crore or more and annual turnover of Rs.1000 Crore or more and engaged in multiple businesses and have appointed Chief Executive Officer for each such business, are allowed to appoint an individual as Chairperson and Managing Director.

Accordingly, if Vijay Ltd satisfies the above conditions, they can appoint Ramesh as Chairman and Managing Director.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2021, Q. 3(d) (Old syllabus).

Draft Board Resolution for appointment of Managing Director:

“RESOLVED THAT pursuant to Section 196 read with read with Schedule V and other applicable provisions of Companies Act, 2013, consent of Board of Directors of the Company be and is hereby accorded to the appoint Mr. Rahul, a MBA graduate from IIM Mumbai having valid DIN ____, as the Managing Director of the company for a period of 5 years effective from 1st May, 2024 subject to approval by a resolution of shareholders in a general meeting.

RESOLVED FURTHER THAT Mr. Rahul shall be paid remuneration as follows:

(i)Salary of Rupees 2 Lakh per month.

(ii)Commission, as may be decided by the Board of Directors of the company from time to time.

(iii)Perquisites: Free Housing Accommodation facility, Medical reimbursement up to 15,000 per month, Personal Accident Insurance of 5 Lakh

(iv)Gratuity, Provident Fund etc. as per the policy of the company.

RESOLVED FURTHER THAT in the event of loss or inadequacy of profits, the salary payable to him shall be subject to the limits specified in Schedule V.

RESOLVED FURTHER THAT the Company Secretary of the company be and is hereby authorized to file necessary forms and returns with the Registrar of Companies in respect of the above appointment.”

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2024, Q. 4(b) (Syllabus 2017).

1.According to Section 196(4) of the Companies Act, 2013, in case the provisions of Part I of Schedule V of Companies Act, 2013, are not fulfilled while appointing a whole-time director, an application seeking approval of Central Government for the appointment of whole-time director (WTD) shall be made in Form MR-2 along with the necessary fees payable under the Companies (Registration Offices and fess) Rules, 2014.

2.As per Section 201(2) of the Act, before an application is made by a company to the Central Government u/s 196 of the Act, there shall be issued by or on behalf of the company a General Notice to the members indicating the nature of application proposed to be made.

3.The company shall attach a copy of the Notice with the application together with certificate by the company as to due publication thereof.

4.The application shall be made within 90 days from the date of such appointment with regard to compliance of Section 196 of the Act.

5.A return of appointment of WTD is required to be filed with the ROC within 60 days of the appointment in form MR-1.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2024, Q. 5A(iii) (Syllabus 2017).

Disqualification of Managing Director, Whole-Time Director or Manager - Section 196 (3) of Companies Act 2013.

No company shall appoint or continue the employment of any person as managing director, whole-time director, or manager who –

(a)is below the age of twenty-one years or has attained the age of seventy years.

However, the appointment of a person who has attained the age of seventy years may be made by passing a special resolution in which case the explanatory statement annexed to the notice for such motion shall indicate the justification for appointing such person;

(b)is an undischarged insolvent or has at any time been adjudged as an insolvent;

(c)has at any time suspended payment to his creditors or makes, or has at any time made, a composition with them; or

(d)has at any time been convicted by a court of an offence and sentenced for a period of more than six months.

(Conditions to be fulfilled for the Appointment of Managing or Whole-Time Director or a Manager without the approval of the Central Government as Per Schedule V of the Companies Act, 2013 (Part I-Schedule V of the Companies Act, 2013)

No person shall be eligible for appointment as a managing or whole-time director or a manager of a company unless he satisfies the following conditions, namely: -

(a)The person had not been sentenced to imprisonment for any period, or to a fine exceeding one thousand rupees, for the conviction of an offence under any of the Acts as specified under Schedule V of the Companies Act, 2013.

(b)The person had not been detained for any period under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act, 1974.

Provided that where the Central Government has given its approval to the appointment of a person convicted or detained mentioned above, as the case may be, no further approval of the Central Government shall be necessary for the subsequent appointment of that person if he had not been so convicted or detained subsequent to such approval.

(c)The person is resident of India.

(d)He has completed the age of 21 years and not attained the age of 70 years.

Other disqualifications: Further, the disqualification for appointment of director under Section 164 shall also be applicable to a person being appointed as a managing director or a whole-time director because they are essentially the director of the company.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2024, Q. 6A(iv) (Syllabus 2022).

Section 196 of the Companies Act, 2013 provides that no company shall appoint or employ at the same time a Managing Director and a Manager. Further, a company shall not appoint or reappoint any person as its Managing Director, Whole Time Director or Manager for a term exceeding five years at a time and no reappointment shall be made earlier than one year before the expiry of his term. Section 196(2) relates to term of managing director not to exceed five years. Section 196(2) applicable to all companies whether public or private, but is not applicable to Government Company.

With reference to above provisions, in the given case, if Amit is appointed as Managing Director for life time in PQR Private Limited then such appointment is in contravention of section 196(2). PQR Pvt. Ltd. cannot appoint Amit as Managing director for a period exceeding five years at a time.

If the Company is a Government Company, then section 196(2) is not applicable vide Notification No. GSR 463(E) dated 05-06-2015. In such a case, his appointment can be made for a period till he retires from Government service.

Section 6(2) of the Companies Act, 2013 states that any provision contained in the memorandum, articles, agreement or resolution shall, to the extent to which it is repugnant to the provisions of this Act, become or be void, as the case may be. Hence, even though articles provide the provision for appointment of Managing Director for longtime, it is contrary to the provisions of the Act and hence invalid. Therefore, in case of PQR Pvt. Ltd., MD can’t be appointed for life time.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2023, Q. 4(c) (Syllabus 2017).

Section 196 of the Companies Act, 2013 provides that no company shall appoint or employ at the same time a Managing Director and a Manager. Further, a company shall not appoint or re-appoint any person as its Managing Director, Whole Time Director or manager for a term exceeding five years at a time and no re-appointment shall be made earlier than one year before the expiry of his term.

No company shall appoint or continue the employment of any person as managing director, whole-time director or manager who —

a)is below the age of twenty-one years or has attained the age of seventy years:

b)is an undischarged insolvent or has at any time been adjudged as an insolvent:

c)has at any time suspended payment to his creditors or makes, or has at any time made, a composition with them; or

d)has at any time been convicted by a court of an offence and sentenced for a period of more than six months.

Appointment of a person who has attained the age of seventy years may be made by passing a special resolution in which case the explanatory statement annexed to the notice for such motion shall indicate the justification for appointing such person;

Where no such special resolution is passed but votes cast in favour of the motion exceed the votes, if any, cast against the motion and the Central Government is satisfied, on an application made by the Board, that such appointment is most beneficial to the company, the appointment of the person who has attained the age of seventy years may be made.

Hence, Mr.X cannot be appointed as MD, without approval of Central Government, since he is less than 21 years and Mr. Y can be appointed by passing a special resolution.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2022, Q. 5(c) (Syllabus 2017).

As per Section 196(3) of the Companies Act, 2013, no company shall appoint or continue the employment of any person as managing director, whole-time director or manager who is below the age of 21 years or has attained the age of 70 years.

However, appointment of a person who has attained the age of 70 years may be made by passing a special resolution in which case the explanatory statement annexed to the notice for such motion shall indicate the justification for appointing such person.

Further, where no such special resolution is passed but votes cast in favour of the motion exceed the votes, if any, cast against the motion and the Central Government is satisfied, on an application made by the Board, that such appointment is most beneficial to the company, the appointment of the person who has attained the age of seventy years may be made.

Accordingly, in the given case, appointment of Mr. Arjun in Yes No Ltd. can also be made by an application made by the Board of Directors to the Central Government. Therefore, advice of Company Secretary is not correct.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2021, Q. 5(b) (Syllabus 2017).

The Foreign national can also be appointed as a Managing Director of a company subject to the compliance of conditions prescribed under Section 196 along with Part I of Schedule V of the Companies Act, 2013.

As per Part I (e) of Schedule V of the Companies Act, 2013, the person is required to be a resident of India to be appointed as a Managing Director of the company.

As per Explanation I to the above schedule, resident in India includes a person who has been staying in India for a continuous period of not less than 12 months immediately preceding the date of his appointment as a managerial person and who has come to stay in India, —

(i)for taking up employment in India; or

(ii)for carrying on a business or vacation in India.

In the instant case, Kristina Kelly who is a Canadian citizen, appointed as Managing Director of the company w.e.f. November 01, 2019 has not stayed in India for a continuous period of 12 months immediately preceding the date of her appointment. Thus, her appointment as Managing Director by the Board of Directors of the Company is not valid as it is not in compliance with Part I of Schedule V of the Companies Act, 2013.

Hence, to validate her appointment, the company is required to file an application in e-Form MR-2 within a period of 90 days from the date of such appointment to the Central Government seeking the approval for such appointment as provided in Section 196 read with Rule 7 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2020, Q. 5(d) (Syllabus 2017).

In terms of Section 196 and 201 of the Companies Act, 2013 in case the provisions of Schedule V of the Companies Act, 2013 are not fulfilled by company, w.r.t. appointment of a Managing Director, the terms and conditions of such appointment and remuneration payable be approved by the Board of Directors at a meeting which shall be subject to approval by a resolution at the next general meeting of the company and by the Central Government. Further an application seeking approval to the appointment of a managing director as aforesaid shall be made to the Central Government, in E-Form No. MR.2, within a period of ninety days from the date of such appointment.

As per Section 201 of Companies Act, 2013, before such application is made to the Central Government, there shall be issued by or on behalf of the company a general notice to the members indicating nature of application proposed to be made. The general notice shall be published in at least once in a newspaper in the principal language of the district in which, registered office of the Company is situated and at least once in English in an English newspaper circulating in that district.

The copies of the notices, together with a certificate by the company as to the due publication therefore, shall be attached to the application.

Therefore, Tirubuvani Sugars Limited will file an application seeking approval to the appointment of Jackson as Managing Director to the Central Government in e-Form No. MR-2.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2019, Q. 5(a) (Syllabus 2017).

According to Section 196(1) of the Companies Act, 2013, a re-appointment of any person as managing director, whole-time director or manager cannot be made earlier than one year before the expiry of his term as managing director. According to Section 196(3) of the Companies Act, 2013, the managing director can be continued in employment after he has attained the age of 70 years only by passing a special resolution in which case the explanatory statement annexed to the notice for such motion shall indicate the justification for such re-appointment.

In the instant case, the term of office of managing director comes to an end on 31st May, 2020. The re-appointment of managing director is sought to be made on 21st May, 2019 i.e. more than one year before the expiry of his term of office. Therefore, the re-appointment of managing director is not in order as the same is not in line with Section 196(1). Further, as the managing director completes 70 years on 31st May, 2020, his re-appointment requires special resolution.

In the instant case, his re-appointment has been made by passing an ordinary resolution and not by special resolution as mandated by Section 196 (3) which is also not in order.”

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2019, Q. 2A(ii) (Old syllabus).

According to Section 196(3) of the Companies Act, 2013 no company shall appoint or continue the employment of any person as managing director, whole-time director or manager who is below the age of twenty-one years or has attained the age of seventy years. Further appointment of a person who has attained the age of seventy years may be made by passing a special resolution in which case the explanatory statement annexed to the notice for such motion shall indicate the justification for appointing such person

In case where no such special resolution is passed but votes cast in favour of the motion exceed the votes, if any, cast against the motion and the Central Government is satisfied, on an application made by the Board, that such appointment is most beneficial to the company, the appointment of the person who has attained the age of seventy years may be made.

A person who has attained the age of seventy may be appointed as the managing director of the company after passing special resolution. In the present case the special resolution was not passed.

Mr. Shyamal may be appointed as the Managing Director since the votes cast in favour exceed the vote cast against the resolution and Central Government approval may be obtained by the Board of Directors of the Company to appoint him as managing director. If the Central Government is satisfied the approval may be granted.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2018, Q. 5(e) (Syllabus 2017).

According to section 196 (5) of Companies Act, 2013 where an appointment of a managing director, whole-time director or manager is not approved by the company at a general meeting, any act done by him before such approval shall not be deemed to be invalid.

In accordance with above stated provision in the present case the contention of refusing to accept delivery of goods on the grounds that the appointment of managing director was not approved at the general meeting and agreement was signed prior to general meeting and after appointment by the Board does not stand valid.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2018, Q. 5A(ii) (Syllabus 2017).

Greenstone Cements Ltd. being managed by a Managing director proposes to pay the following managerial remuneration:

Commission @ 5% of net profits to its Managing Director

Clause 1 of second proviso to section 197(1) provides that except with the approval of the company in general meeting by a special resolution, remuneration payable to any one managing director or whole-time director or manager shall not exceed 5% of the net profits of the company and if there is more than one such director then remuneration shall not exceed 10% of the net profits to all such directors and manager together.

In the present case since the company is managed by a managing director, commission proposed to be paid @5% of net profits to the managing director is permissible and no approval of company in general meeting is required, subject to any restrictions or compliance requirements in the Articles of Association. The said proposal is valid.

Remuneration to Other Directors:

Clause ii of second proviso to section 197(1) provides that except with the approval of the company in general meeting by a special resolution, remuneration payable to directors who are neither managing directors nor whole time directors shall not exceed –

a)1% of net profits of the company if there is managing or whole-time director or manager

b)3% of net profits in any other case

In the present case maximum remuneration allowed to directors other than managing or whole-time director is 1% of net profits of the company because the company is managed by a managing director. Hence, if the company wants to fix directors remuneration for more than 1% of the net profits of the company, approval of the company in general meeting is required by passing a special resolution. Therefore, the said proposal is not valid and can be said to be valid only if made in compliance with the said requirement.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2025, Q. 5(b) (Syllabus 2022).

According to section 197 of Companies Act, 2013 read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 and amendment thereunder the following disclosure on particulars of employees are to be made:

The Board’s report shall include a statement showing the names of top ten employees and the name of every employee of the company, who-

i.if employed throughout the financial year, was in receipt of remuneration for that year which, in the aggregate, was not less than one crore and two lakh rupees;

ii.if employed for a part of the financial year, was in receipt of remuneration for any part of that year, at a rate which, in the aggregate, was not less than eight lakh and fifty thousand rupees per month;

iii.if employed throughout the financial year or part thereof, was in receipt of remuneration in that year which, in the aggregate, or as the case may be, at a rate which, in the aggregate, is in excess of that drawn by the managing director or whole-time director or manager and holds by himself or along with his spouse and dependent children, not less than two percent of the equity shares of the company.

Since Manish and Manisha jointly hold 8% (more than 2%) equity shares and Manish draws a salary more than that of the Manager (Rs. 96 lakh > 84 lakh), his name should be disclosed in the Board’s report.

Further, since his son Mohan employed in company and drawing ₹ 9 lakh per month is more than ₹ 102 lakh per annum, his name should also be disclosed in the Board’s report.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2025, Q. 6A(ii) (Syllabus 2022).

(a)In case the registers are not maintained in an electronic form the physical registers/documents should be scanned for uploading in a virtual data room established for the purpose. Login ID and password can be provided for inspection and to be ensured that only view rights are given for inspection and the registers, documents cannot be deleted, copied or downloaded or the registers/ documents may be made available for inspection on a virtual platform like Zoom/Microsoft Teams etc and displayed in a presentation form. The registers / documents which shall be made available for inspection in connection with the AGM, shall be made available from the time notice is given till the conclusion of the meeting.

(b)As per proviso to Section 197 (4) of the Companies Act, 2013, any remuneration for services rendered by any such director in other capacity shall not be so included in remuneration if following conditions are satisfied:

1.the services rendered are of a professional nature; and

2.in the opinion of the Nomination and Remuneration Committee, if the company is covered under sub-section (1) of section 178, or the Board of Directors in other cases, the director possesses the requisite qualification for the practice of the profession.

It is to be noted that both the conditions should be satisfied.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2025, Q. 6A(iv) (Syllabus 2022).

(a)Rule 4 of the Companies (Appointment & Remuneration of Managerial Personnel) Rules, 2014 read with section 197(5) of the Companies Act, 2013 provides that a company may pay a sitting fee to a director for attending meetings of the board or committees thereof such sum as may be decided by the board of directors thereof which shall not exceed one lakh rupees per meeting. For independent directors and women directors, the sitting fee shall not be less than the sitting fee payable to other directors.

Applying the above provision in the case given, payment of Rs. 110,000 to woman director Dipika is not in order. The maximum permissible sitting fee per meeting, as per the rules, is INR 100,000. Therefore, this payment exceeds the statutory limit. Also sitting fees to independent director Chirag Rs.60,000 is less than that of Executive director Avik Rs. 70,000 This is in direct contravention of the legal provision that mandates the sitting fee for independent directors (and women directors) to be no less than that payable to other directors. Hence, the resolution is invalid.

(b)As per section 197(9) of the Companies Act, 2013, if any director draws or receives, directly or indirectly, by way of remuneration any such sums in excess of the limit prescribed by this section or without approval required under this section, he shall refund such sums to the company, within two years or such lesser period as may be allowed by the company, and until such sum is refunded, hold it in trust for the company. Therefore, advice of the company to the director to refund in five months is permissible. The objection by director is invalid.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2025, Q. 6A(iv) (Syllabus 2022).

Section 197 of the Companies Act, 2013, imposes certain restrictions on the remuneration payable to managerial personnel of a public company. The primary objective of this provision is to prevent excessive remuneration at the cost of shareholders’ interests.

The total managerial remuneration payable by a public company to its directors (including managing director and whole-time director) and its manager in respect of any financial year shall not exceed eleven percent of the net profits of the company for that financial year.

Fees payable to directors under Section 197(5) are excluded from this limit.

Net Profits Calculation: The method for calculating net profits is prescribed under Section 198 of the Act.

Restrictions within the overall ceiling: Within the overall ceiling of 11% of net profits the internal ceiling on the remuneration of the Manager, MD and WTD have been prescribed as below:

(1)In case of one MD, WTD or manager - 5% of the net profits of the company.

(2)More than one Managing Director/ Whole time Director/Manager-10% of the net profits of the company together.

(3)Directors who are neither MD/WTD or Manager-1% of the net profits of the company, if there is a MD/WTD or Manager and 3% if there is no MD/WTD or Manager.

Shareholder Approval: If a company wishes to pay remuneration exceeding the 11 % limit, or the internal limits so specified as above it requires the approval of its shareholders through a special resolution. Where the company has defaulted in payment of dues to any bank or public financial institution or non-convertible debenture holders or any other secured creditor, the prior approval of the bank or public financial institution concerned or the non-convertible debenture holders or other secured creditor, as the case may be, shall be obtained by the company before obtaining the approval in the general meeting.

Limit on remuneration: If there is no profit or inadequate profit the remuneration to MD/WTD or Manager shall be paid in accordance with the provisions of schedule V of the Companies Act, 2013.

Section 197 of the Companies Act, 2013, imposes certain restrictions on the remuneration payable to managerial personnel of a public company. However, these restrictions applies to a public company only. Private companies are free to appoint any person as managerial personnel and pay any amount of remuneration, subject to any restrictions in its Articles of Association.

Further, neither the provisions of Section 203 of the Act read with Rule 8 of the Companies ( Appointment and Remuneration of Managerial Personnel) Rules, 2014 relating to appointment of Key Managerial Personnel applies to a private company. Thus, unless otherwise specified in the Articles of Association of the private company, there is no requirement of approvals from shareholders or from creditors for payment of remuneration to Key Managerial Personnel.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2024, Q. 5(c) (Syllabus 2017).

Section 197 read with Section 198 and Schedule V of the Companies Act, 2013 deals with the provisions related to managerial remuneration.

As per Section 197 (3) of the Act, notwithstanding anything contained in sub-sections197 (1) and 197(2), but subject to the provisions of Schedule V, if in any financial year, a company has no profits or its profits are inadequate, the company shall not pay to its directors, including any managing or whole time director or manager, or any other non-executive director, including an independent director by way of remuneration any sum exclusive of any fees payable to directors under 197 (5) hereunder except in accordance with the provisions of Schedule V whereunder slab- wise limit on managerial remuneration on the basis of the effective capital of the company has been stipulated.

Computation of Effective Capital of Company for determining managerial remuneration:

As per the limit stipulated if the effective capital is INR 100 crores and above but less than INR 250 Crores the maximum yearly remuneration payable to the managerial persons shall not exceed INR 120 Lakhs.

In the given scenario, the effective capital of the company is INR 120 crores. Hence, the company can pay renumeration to the managing director maximum up-to Rs. 120 lakhs without seeking approval of shareholders by passing a special resolution.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2024, Q. 6A(i) (Syllabus 2022).

As per Section 197 of the Companies Act, 2013, the total managerial remuneration payable by a public company, to its Directors, including managing director and whole-time director, and its manager in respect of any financial year shall not exceed eleven per cent. of the net profits of that company for that financial year computed in the manner laid down in section 198 except that the remuneration of the Directors shall not be deducted from the gross profits.

Provided that the company in general meeting may, authorise the payment of remuneration exceeding eleven per cent. of the net profits of the company, subject to the provisions of Schedule V.

Provided further that, except with the approval of the company in general meeting, by a special resolution—

(i)the remuneration payable to any one managing director; or whole-time director or manager shall not exceed five per cent. of the net profits of the company and if there is more than one such director remuneration shall not exceed ten per cent. of the net profits to all such Directors and manager taken together;

(ii)the remuneration payable to Directors who are neither managing Directors nor whole-time Directors shall not exceed,—

(A)one per cent. of the net profits of the company, if there is a managing or whole-time director or manager;

(B)three per cent. of the net profits in any other case.

Provided also that, where the company has defaulted in payment of dues to any bank or public financial institution or non-convertible debenture holders or any other secured creditor, the prior approval of the bank or public financial institution concerned or the non-convertible debenture holders or other secured creditor, as the case may be, shall be obtained by the company before obtaining the approval in the general meeting.

Hence a public company can make payment of managerial remuneration to its directors including managing director and whole-time director, and its manager, in excess of 11% of the net profits, by calling a general meeting and obtaining the consent of the shareholders and fulfilling all other obligations as per law .

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2021, Q. 3(d) (Old syllabus).

The overall limit of managerial remuneration as indicated under section 197 of the Companies Act, 2013 read with Schedule V of the Act inter alia includes the following conditions:

-Except with the approval of the Company in general meeting by a special resolution, the remuneration payable to any one managing director shall not exceed five percent of the net profit of the Company.

-The remuneration shall not include any fee for the services rendered by such director in other capacity if the services are of professional nature and in the opinion of the Nomination and Remuneration committee or the Board of Directors, as the case may be, the director possesses the requisite qualification for the practice of the profession.

-A director may receive remuneration by way of fee for attending meetings of the Board or Committee thereof or for any other purpose whatsoever as may be decided by the Board.

As per Rule 4 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a Company may pay a sitting fee to a director which shall not exceed one lakh rupees per meeting of the Board or Committee thereof.

Section 197(2) of the Companies Act, 2013 provides that the percentages aforesaid shall be exclusive of sitting fees payable to Directors. Therefore, the sitting fees of Rs. 50,000 for every meeting of the board or Committee thereof, is not included in the overall remuneration.

Further, considering the above provisions, the fee payable for actuarial services is to be added to Mr. X remuneration as he does not hold any professional qualification to practice actuarial science.

In this case, the overall remuneration exceeds the limit of 5% of net profits as provided in the section. Therefore, the company has to get the approval of the shareholders by way of a special resolution in terms of Section 197 of the Act.

As the company has defaulted in payment of interest and principal on term loans to the banks, the company should also take a prior approval of the banks for paying the above remuneration to Mr. X before passing the special resolution by shareholders.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2021, Q. 4(c) (Syllabus 2017).

As per Rule 4 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 a company may pay a sitting fees to a director for attending meetings of the Board or committees thereof, such sum as may be decided by the Board of directors thereof which shall not exceed one lakh rupees per meeting of the Board or committee thereof.

However, for Independent Directors and Women Directors, the sitting fees shall not be less than the sitting fee payable to other directors.

So, XYZ Ltd. cannot pay sitting fees to its women directors less than the sitting fees payable to other directors of the company.

As per Section 196 of the Companies Act, 2013 a company shall not appoint or re-appoint any person as its managing director for a term exceeding five years at a time. So, Mr. X cannot be appointed as Managing Director of the company for a term exceeding five years at a time.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2021, Q. 5(c) (Syllabus 2017).

Section 197 of the Companies Act, 2013 contains certain limits with respect to remuneration of Directors including managing director and whole time director and manager. However, these limits do not apply to other key managerial personnel i.e. the Chief Executive Officer, the Chief Financial Officer and the Company Secretary. Similarly, Schedule V contains certain limits with respect to remuneration of managing director, whole time director and manager. However, these limits also do not apply to other key managerial personnel, i.e. the Chief Executive Officer, the Chief Financial Officer and the Company Secretary.

Thus, the limits on managerial remuneration as contained in section 197 of the Companies Act, 2013 and schedule V shall not apply to Mr. X.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2021, Q. 5A(i) (Syllabus 2017).

Section 197(5) of the Companies Act, 2013 read with Rule 4 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 prescribes that a company may pay a sitting fee to a Director for attending meetings of the Board or committees thereof, such sum as may be decided by the Board of Directors, which shall not exceed Rs. 1 lakh per meeting of the Board or committees thereof.

Provided that for Independent Directors and Women Directors, the sitting fee shall not be less than the sitting fee payable to other Directors.

Based on the above stipulated provisions, the following mentioned sitting fees payable is:

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2021, Q. 5(a) (Syllabus 2017).

The ABC Corporation Ltd. can remunerate their non-professional managerial personnel according to the following provisions of Section 197 of the Companies Act, 2013 read with Schedule V of the Act, which provides as under:

(a)If in any financial year, a company has no profits or its profits are inadequate, the company shall not pay by way of remuneration any sum exclusive of sitting fees to its directors including any managing or whole- time director or manager except in accordance with the provisions of Schedule V.

(b)In cases where Schedule V is applicable on grounds of no profits or inadequate profits, any provision relating to the remuneration of any director which purports to increase or has the effect of increasing the amount thereof, whether the provision be contained in Company’s memorandum or articles, or in an agreement entered into by it, or in any resolution passed by the company in general meeting or its Board, shall not have any effect unless such increase is in accordance with the conditions specified in that schedule.

In case a company has inadequate profits/no profits in any financial year, no amount shall be payable by way of remuneration except if these provisions are followed:

Provided that the remuneration in excess of above limits may be paid if the resolution passed by the shareholders is a special resolution.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2019, Q. 5A(i) (Syllabus 2017).

According to section 197 of Companies Act, 2013 read with Rule 5(2) of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 and amendment thereunder the following disclosure on particulars of employees are to be made :

The board's report shall include a statement showing the names of top ten employees and the name of every employee of the company, who-

(i)if employed throughout the financial year, was in receipt of remuneration for that year which, in the aggregate, was not less than one crore and two lakh rupees;

(ii)if employed for a part of the financial year, was in receipt of remuneration for any part of that year, at a rate which, in the aggregate, was not less than eight lakh and fifty thousand rupees per month;

(iii)if employed throughout the financial year or part thereof, was in receipt of remuneration in that year which, in the aggregate, or as the case may be, at a rate which, in the aggregate, is in excess of that drawn by the managing director or whole-time director or manager and holds by himself or along with his spouse and dependent children, not less than two percent of the equity shares of the company.

Since Ganesh and Seema jointly hold more than 2% equity shares and Ganesh draws a salary more than that of Managing director, his name should be disclosed in the Board's report.

Further, his son employed in XY Company Ltd., drawing more than Rs. 9 lakh rupees a month, his name should also be disclosed in the Board's report.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2018, Q. 4(b) (Old syllabus).

According to section 197(13) of Companies Act, 2013 where any insurance is taken by a company on behalf of its managing director, whole-time director, manager, Chief Executive Officer , Chief Financial Officer or Company Secretary for indemnifying any of them against any liability in respect of any negligence, default, misfeasance, breach of duty or breach of trust for which they may be guilty in relation to the company, the premium paid on such insurance shall not be treated as part of the remuneration payable to any such personnel. Further it has been provided that if such person is proved to be guilty, the premium paid on such insurance shall be treated as part of the remuneration.

In accordance with above stated provision in the present case the company can pay the insurance premium of Rs. 15.00 lacs for company secretary and managing director for indemnifying any of them against any liability in respect of any negligence, default, misfeasance, breach of duty or breach of trust for which they may be guilty in relation to the company, and such shall not be treated as remuneration.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2018, Q. 5A(iii) (Syllabus 2017).

According to section 198 of the Companies Act, 2013 net profits for any financial year for the purpose of managerial remuneration payable under section 197 of the Act shall be calculated as follows:

Credit shall not be given for those sums specified in section 198(3)

Less: (if credited to P&L account for arriving at profit before tax)

-Profits from sale of any immovable property or fixed assets of capital nature comprised in the undertaking or any of the undertakings unless business of the company consists, whether wholly or partly, of buying and selling any such property or assets

-Provided where the amount for which any fixed asset is sold exceeds the written down value thereof, credit shall be given for so much of excess as is not higher than the difference between the original cost of that fixed asset and its written-down value

-Any change in carrying amount of an asset or of a liability recognised in equity reserves including surplus in profit & loss account on measurement of the asset or liability at fair value

-Any amount representing unrealised gains, notional gains or revaluation of assets

In making the computation aforesaid the following sum specified under section 198(4) shall be deducted – debts considered bad and written off or adjusted during the year

Non-deductible items [section 198(5)]

Loss of capital nature including loss on sale of undertaking

Current taxes payable by the company

Computation of net profit for purpose of calculating managerial remuneration as laid down under section 198 of the Act

Working note:

Note - credit shall not be given for profits from sale of any immovable property or fixed assets (provided credit shall be given for so much of excess as is not higher than the difference between the original cost of that fixed asset and its written down value.

Profit on sale of fixed assets = ₹. 16 lakh - ₹. 10.40 lakh = ₹. 5.60 lakh but credit cannot be greater than the difference of ₹. 12.80 lakh (original cost) - ₹. 10.40 lakh (WDV) = ₹. 2.40 lakh. Hence ₹. 3.20 lakh should be deducted from net profit.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2026, Q. 5(c) (Syllabus 2022).

The adjusted net profit as per Section 198 read with Schedule V of the Companies Act, 2013 read with Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is computed as given below: Unit in Rupees

Therefore, adjusted net profit for managerial remuneration:Rs. 35, 12,000 Since the company has two whole time directors and three non-executives part time directors, the managerial remuneration payable to-i)MD & WTD: @10% of Adjusted Net Profit : Rs. 3,51,200 ii)Three non-executive directors@1% of Adjusted Net profit: Rs. 35,120

Assumptions: In accordance with Section 198 of the Act read with companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014-

a.It is assumed that the accumulated past losses have not been deducted yet in computation of adjusted net profit for the purpose of managerial remuneration

b.It is assumed that the surcharge of Rs. 1,20,000 on income tax is a tax in the nature of tax on excess on abnormal profit under section 198(4)(d)

c.Contribution to charitable trust is bonafide and within approved limits under section 181 of the Act.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2023, Q. 5A(ii) (Syllabus 2017).

(a)Power of the company to pay compensation: Section 202 of Companies Act 2013, provides that a company may make payment to a managing or whole-time director or manager, but not to any other director, by way of compensation for loss of office, or as consideration for retirement from office or in connection with such loss or retirement.

Cases where no compensation is payable (Exceptions): However, under Section 202(2) no payment shall be made in the following cases: —

(i)where the director resigns from his office as a result of the reconstruction of the company or of its amalgamation with any other body corporate or bodies corporate, and is appointed as the managing or whole-time director, manager, or other officer of the reconstructed company or of the body corporate resulting from the amalgamation;

(ii)where the director resigns from his office otherwise than on the reconstruction/ amalgamation of the company;

(iii)where the office of the director is vacated under Section 167(1);

(iv)where the company is being wound up, whether by an order of the Tribunal or voluntarily, provided the winding up was due to the negligence or default of the director;

(v)where the director has been guilty of fraud or breach of trust or gross negligence or mismanagement of the conduct of the affairs of the company or any subsidiary company or holding company; and

(vi)where the director has instigated, or has taken part directly or indirectly in bringing about, the termination of his office.

Statutory Limit on Compensation {Section 202(3)}

Any payment made to a managing or whole-time director or manager in pursuance of section 202 (1) shall not exceed the remuneration which he would have earned if he had been in office for (i) the remainder of his term; or (ii) for three years, whichever is shorter.

Also, such amount of compensation shall be calculated on the basis of the average remuneration actually earned by him during a period of three years immediately preceding the date on which he ceased to hold office, or where he held the office for a lesser period than three years, during such period.

(b)Hence, as stated under (ii) of exceptions, Saleem’s claim for compensation for loss of office shall not be sustainable.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2026, Q. 6A(i) (Syllabus 2022).

Section 202 of the Companies Act, 2013 provides that company may make payment of compensation for any loss of office. Such compensation is payable to Managing Director (MD) or Whole-time Director (WTD) or Manager of company. However, no compensation shall be payable to any other director for loss of office.

As per section 202(2), compensation is not payable in following circumstances:

•Where Managing Director or Whole time Director or Manager resigns his office in view of reconstruction of the company or amalgamation with other company and he is appointed as Managing Director or Whole time Director or Manager of the reconstituted company or body corporate resulting from such amalgamation. In the present case, since Manan has taken up directorship in Nimbo Ltd. Pursuant to a reconstruction within the group companies (in the form of slump sale of one of the undertakings to another group company), he cannot ask for the compensation for loss of office.

•Ojas is not eligible for compensation at all as per the provisions of section 202 of the Companies Act, 2013.

•When a director (MD/WTD) resigns from his office at his / her will (i.e., otherwise than because of the reconstruction or amalgamation) he cannot claim compensation for the loss of office. Accordingly, Naman also cannot claim any compensation for the loss of his office as he has resigned voluntarily.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2022, Q. 5(b) (Syllabus 2017).

(a)Under section 203(2) of the Companies Act, 2013, every whole-time key managerial personnel of a company shall be appointed by means of a resolution of the Board containing the terms and conditions of the appointment including the remuneration. The statement is incorrect.

As per Section 196(4), Subject to the provisions of section 197 and Schedule V, a managing director, whole-time director or manager shall be appointed and the terms and conditions of such appointment and remuneration payable be approved by the Board of Directors at a meeting which shall be subject to approval by a resolution at the next general meeting of the company and by the Central Government in case such appointment is at variance to the conditions Specified in Part I of that Schedule. However, as per notification of 05.06.2015 this provision is not applicable to private companies.

(b)The statement is incorrect. According to Section 203 of the Companies Act, 2013 read with Rule 8 of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 Every listed company and every other public company having a paid-up share capital of ten crore rupees or more shall have whole-time key managerial personnel.

Further as per rule 8A of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, Every private company which has a paid up share capital of ten crore rupees or more shall have a whole -time company secretary. The turnover or borrowings of the company are not relevant for appointment of KMPs.

(c)The statement is partially correct. Section 203 (4) of Companies Act 2013 states that if the office of any whole-time key managerial personnel is vacated, the resulting vacancy shall be filled-up by the Board at a meeting of the Board within a period of 6 months from the date of such vacancy. In the case of MD/WTD, the appointing authority viz., the members in the AGM appoint a director in place of the vacancy of MD/WTD. However, any casual vacancy in the post of MD/WTD can also be filled up by the BOD by appointing the person as an additional director on the Board u/s 161(1) of the Act.

(d)The statement is partially correct. According to Section 203(4A) of the Companies Act, 2013, the provisions of sub-sections (1), (2), (3) and (4) of this section shall not apply to a managing director or Chief Executive Officer or manager and in their absence, a whole-time director of the Government Company. However, the said provisions of Section 203 are equally applicable to appointment of KMPs like CFO and CS in case of Government companies also.

(e)The statement is incorrect. Only listed companies are required to report any appointment/ change in KMPs under Regulation 30 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 within 24 hrs of the appointment/resignation. Other public unlisted and Private limited companies are not required to intimate to stock exchanges.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2025, Q. 6A(i) (Syllabus 2022).

According to Companies Act, 2013 read with Rule 8 and Rule 8A of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, every listed company and every other company with a paid-up capital of Rupees ten crore or more shall appoint a company secretary in the whole-time employment of the company.

All the companies are required to file a return on appointment of company secretary who is a Key Managerial Person under section 2(51) of the Act with the Registrar of Companies (ROC) in Form DIR-12. Public companies are also required to file Form MGT-14 with the ROC.

Hence, BVM International Limited, being the listed company, ABC (Private) Limited and Super Grip Tyres Limited, the unlisted public company whose paid up share capital is more than 10 crore rupees are mandatorily required to appoint a whole-time company secretary and file Form-DIR 12. Additionally, all companies except ABC (Private) Limited, are required to file Form MGT-14 with the RoC.

The appointing authority for company secretary is the Board of directors.

Under Section 203(3) of the Companies Act, 2013, a company secretary shall not hold office in more than one company except the subsidiary company. In the given case, it is proposed to appoint the company secretary of Super Grip Tyres Limited as a company secretary of its associate company- BVM International Limited, simultaneously. Such appointment is not allowed under the Act as the company secretary cannot be appointed as a whole-time company secretary in more than one company except the subsidiary company.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2024, Q. 4(c) (Syllabus 2017).

According to Regulation 6 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR), every listed company is required to appoint a qualified Company Secretary in its employment as the Compliance Officer.

Even though the paid-up share capital of Spa and Resorts Ltd. is of 6 crores which is less than ten crores, as the company is a listed company, it is required to appoint a qualified company secretary in its employment to appoint him as the compliance officer.

According to Section 149 of the Companies Act, 2013, read with Regulation 24 of SEBI (LODR) Regulations, every listed company is required to appoint at least 1/3 of its total strength of BOD as independent director. In this case the listed company has not complied with the requirements of both the Act and the SEBI (LODR) Regulations. Hence on this count also, the company is liable.

In a similar case of Advance Lifestyles Ltd v BSE dated 24th December 2019, the Securities Appellate Tribunal (SAT) has dismissed the appeal filed by the company for non-appointment of compliance officer and independent directors and upheld the fine of Rs. 20.40 lakhs imposed by BSE.

In the light of the above provisions and the case law the company has failed to appoint the company secretary and the independent directors as required. The contention of the company that it is not required to appoint company secretary under the Companies Act, 2013 is not tenable as it is required to do so under the SEBI (LODR) Regulations. Hence, the show-cause notice is valid.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2024, Q. 5A(i) (Syllabus 2017).

“RESOLVED THAT Pursuant to the provision of section 203 (1) of the Companies Act, 2013 read with rule 8 and 8A of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 and any other applicable provisions of the Act and Rules framed thereunder, including any amendments thereto or reenactment thereof from time to time, Mr. __________Membership No.___________of the Institute of Company Secretaries of India (ICSI) be and is hereby appointed as the “Company Secretary” of XYZ Textiles Limited (the Company) on the terms and condition including the terms of remuneration as per appointment letter placed before the meeting, and as recommended by the nomination and remuneration committee.”

“RESOLVED FURTHER THAT pursuant to regulation 6 and 30 read with clause 7 of para A of Part A of Schedule III of SEBI (Listing Obligation And Disclosure Requirement) Regulation 2015, Mr._________ be and is hereby designated and appointed as the “Compliance Officer” of the company and authorised to make all the compliances as may be applicable to the company under the SEBI (Listing Obligation And Disclosure Requirement) Regulation 2015, various other SEBI Regulation, Securities Contract Regulation Act 1956, Industrial and labour laws and other laws as may be applicable to the Company from time to time.”

“RESOLVED FURTHER THAT the company secretary and compliance officer be and is hereby authorised to sign various documents and file forms/ returns on behalf of the company as may be necessary and to do all such acts, deeds. things, and matters incidental there to give effect to the aforesaid resolution.

“RESOLVED FURTHER THAT Mr.____________ ,Managing Director of the Company be and is hereby authorised to sign and submit necessary forms / returns for the appointment of company secretary with the Registrar of Companies, ________________, and also be authorised to intimate the same to the appropriate authorities / regulatory bodies and to do all such acts and deeds as may be necessary in this regard.”

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2024, Q. 6(a) (Syllabus 2022).

Appointment of key managerial persons: Section 203 of the Companies Act, 2013 read with Rule 8 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, mandates the appointment of Key Managerial Personnel and makes it obligatory for a listed company and every other public company having a paid-up share capital of rupees ten crores or more, to appoint following whole-time key managerial personnel:

(i)managing director, or Chief Executive Officer or manager and in their absence, a whole- time director:

(ii)company secretary; and

(iii)chief financial officer

Every whole-time key managerial personnel of a company shall be appointed by means of a resolution of the Board containing the terms and conditions of the appointment including the remuneration.

Rule 8 of the Companies (Meetings of Board and its Powers) Rules, 2014, requires such appointment by the Board of Directors only by means of Resolution passed at meeting of the Board.

Feasibility of appointing as CMD : An individual shall not be appointed or reappointed as the chairperson of the company, as well as the managing director or chief executive officer of the company at the same time unless the Articles of such a company provide otherwise; or the company does not carry multiple businesses. However, such class of companies engaged in multiple businesses and which has appointed one or more chief executive officers for each such business as may be notified by the Central Government are exempted from the above.

MCA vide its notification S.O. 1913(E) dated 25-7-2014 notified that public companies having paid up Share capital of Rs. 100 Cr or more and annual turnover of 1000 Cr or more which are engaged in multiple businesses and have appointed Chief Executive Officer for each such business can appoint an individual as Chairperson and Managing Director.

Hence, A can be appointed in CKC International Ltd. as its CMD as the company's turnover is over Rs. 1000 crore.

Retaining directorship of other companies : With the permission of the Board he can continue to be the director of other companies.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2022, Q. 4(a) (Syllabus 2017).

Section 179(3) read with Rule 8 of Companies (Meetings of Board and its Powers) Rules, 2014, provides that the Board of Directors of a company shall appoint or remove key managerial personnel (KMP) by means of resolutions passed at meetings of the Board.

Therefore, appointment of A as a Company Secretary in the company cannot be done by circular resolution.

As per Section 203(3) of the Companies Act, 2013, a whole time key managerial personnel shall not hold office in more than one Company except in its subsidiary company at the same time.

In the given situation A has is also advised to act as a Group Company Secretary consisting of a group of a parent company in which he has been appointed and its subsidiary. Therefore, he can act as a Group Company Secretary to look after the parent company and its subsidiary.

Alternate Answer 5(b)

Section 179(3) read with Rule 8 of Companies (Meetings of Board and its Powers) Rules, 2014, provides that the Board of Directors of a company shall appoint or remove key managerial personnel (KMP) by means of resolutions passed at meetings of the Board.

Therefore, appointment of A as a Company Secretary in the company cannot be done by circular resolution.

In the given situation, A has been appointed as a Company Secretary in the company by a circular resolution which is not valid hence he cannot be advised to act as a Group Company Secretary and head of the parent Company and its subsidiary.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2021, Q. 5(b) (Syllabus 2017).

A Company Secretary can be removed or dismissed like any other employees of the organization. Since he/she is appointed by Board, the Board of Directors of a company has absolute discretion to remove a Company Secretary or to terminate his/her services at any time for any reason or without any reason. However, principles of natural justice like show cause notice, hearing, reasoned order etc. must be followed.

A Company Secretary can be removed in accordance with the terms of appointment and the Board can record the same. The procedure for removal of Company Secretary is:

•Convene a Board Meeting after giving notice to all the Directors of the company as per section 173 of the Companies Act, 2013, place the matter of removal of the Company Secretary and pass a resolution to the effect. The resolution shall state the effective date of termination of the Company Secretary.

•The Company shall thereafter serve a notice of termination to the Company Secretary. The period of notice shall be governed by the employment letter or in its absence the termination policy of the Company.

•The Company Secretary shall cease to be in office from the date of expiry of notice.

•Company is required to file e-Form DIR-12 within 30 days of cessation with the Registrar of Companies together with requisite filing fees along with evidence of Cessation. - Inform the stock exchange, if the company is listed.

•Make entries in the Register maintained for recording the particulars of Company Secretaries under section 170 of the Companies Act, 2013.

•Issue a general public notice, if it is so warranted, according to size and nature of the company.

Thus, Logic Ltd. has to follow above procedures to remove Radhika, Company Secretary of the company.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2021, Q. 5A(ii) (Syllabus 2017).

Section 203 of the Companies Act, 2013 read with Rule 8 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 mandates the appointment of whole-time Key Managerial Personnel and makes it obligatory for every listed company and every other public company having a paid- up share capital of rupees ₹10 crores or more, to appoint the following whole-time key managerial personnel:

(i)Managing Director, or Chief Executive Officer or Manager and in their absence, a Whole-Time Director;

(ii)Company Secretary; and

(iii)Chief Financial Officer.

Accordingly, it is mandatory for only those Public Limited Companies which are covered under the aforesaid mentioned provisions to appoint whole-time Key Managerial Personnel.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, December 2020, Q. 1(a) (Old syllabus).

i)According to Section 203 of the Companies Act, 2013, the functions of the company secretary, inter alia, shall include -

a.Reporting to the Board of Directors (BOD) of the company compliance with the Rules made under the Act and other applicable laws.

b.To ensure that the company complies with applicable Secretarial Standards issued by the Institute of Company Secretaries of India and approved by the Central Government.

ii)On the other hand, according to Regulation 6 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, a listed company shall appoint a qualified company secretary as the compliance officer of the listed company. He shall be responsible for-

a.Ensuring conformity with the regulatory provisions applicable to the listed entity in letter and spirit b. Co-ordination with and reporting to the SEBI, Stock Exchanges and depositors on compliance with applicable rules, regulations and directions of the Authorities.

iii)Thus, the compliance officer should be a duly qualified company secretary in employment of the listed company. According to Rule 8 of Companies (Appointment and Remuneration of managerial personnel) Rules, 2014, a company with a paid-up capital of rupees ten crore or more is required to appoint a company secretary.

iv)On the other hand, only a listed company is mandated to appoint a qualified company secretary in its employment as its compliance officer. Hence, unless the CFO is also a qualified company secretary, he cannot be appointed as the compliance officer of the listed entity.

Source⁠​‌​‌‌​‌​⁠: ICSI Guideline Answers, June 2023, Q. 5A(i) (Syllabus 2017).