Key Management Personnel (KMP)

Key Management Personnel

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Key Management Personnel (KMP)

Key Management Personnel (KMP) is a group of persons who are responsible for managing the operations of a company. The word ‘personnel’ indicates that it refers to a group of persons rather than one person. They are the decision-makers in a company and are accountable for the errors in the company’s operations. The Board of Directors of a Company are responsible for governing a company, but do not necessarily involve in the day-to-day management. They often meet periodically in Board Meetings to set the management goals. The KMP’s are the ones who actually run the company to achieve the set goals. Accounting Standard 18 (AS-18) defines Key Management Personnel as ‘those persons who have the authority and responsibility for planning, directing and controlling the activities of the reporting enterprise’. In this article, we look at the provisions relating to KMP in detail.

Key Management Personnel under the Companies Act, 2013

Under Section 2(51) of the Companies Act, 2013, Key Management Personnel in relation to a company means:

  • Chief Executive Officer or the Managing Director or the Manager;
  • Company Secretary;
  • Whole-time director;
  • Chief Financial Officer; and
  • Other officer as may be prescribed.

The authority to add any other category to KMP is under the Central Government. Unless a new category is added, no other person can be considered as KMP except the ones who fall under the categories mentioned above.

Appointment of Key Management Personnel

The Section 203 of the Companies Act, 2013 draws out the provision of Key Management Personnel. They are appointed by the Board of Directors and they are responsible for fill any vacancy within six months of such a vacancy. It is not compulsory to appoint KMP in all businesses. However, it is mandatory for every listed company and any other companies, with a paid-up share capital of Rs. 10 Lakh or more, to appoint a whole-time KMP. Furthermore, it is necessary for any company with a paid-up capital of Rs. 5 Lakh or more to appoint a full-time company secretary. Thus, Rs. 5 Lakh is the threshold for any company to appoint Key Management Personnel.

Roles and Responsibilities of Key Management Personnel

Key Management Personnel carry a huge responsibility of being liable for any non-compliance with the provisions of the Companies Act, 2013. The management function of implementing important decisions comes under the responsibilities of Key Management Personnel. The future of a company depends on the effectiveness of its Key Management Personnel and the consequences of KMP’s errors would influence the company negatively. Some of their main roles and responsibilities are given below:

  • As per Section 170 of the Act, the details of securities held by Key Management Personnel in the company or its holding, subsidiary, a subsidiary of company or associate companies should be disclosed and recorded in the Registrar of the Books.
  • Key Management Personnel has a right to be heard in the meetings of the Audit Committee while considering the auditor’s report. However, they do not have the right to vote.
  • According to Section 189(2), Key Management Personnel should disclose to the company, within 30 days of appointment, relating to their concern or interest in the other associations, which are required to be included in the register.

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