Conditions for Appointment Key Managerial Persons Specified
The Ministry of Corporate Affairs (“MCA”) has amended Schedule V of the Companies Act, 2013 (“Act”) via notification dated September 12, 2018 (“Amendment Notification”) which deals with conditions which are to be fulfilled for the appointment of a managing or whole-time director or a manager (“Key Managerial Person”) without the approval of the Central Government. Following are some major changes:
- No person shall be eligible for appointment as a Key Managerial Person if he/she has been convicted of an offence under the Insolvency and Bankruptcy Code, 2016, the Goods and Services Tax Act, 2017 and the Fugitive Economic Offenders Act, 2018.
- Prior to Amendment Notification, a person was not allowed to be appointed as a Key Managerial Person if he/she was already appointed as a Key Managerial Person in more than one company and if he draws remuneration from one or more companies subject to the ceiling provided in the Act. This restriction has been removed after the amendment.
- The shareholders of a company making no profit or inadequate profit have been given the power to decide whether to give remuneration to the Key Managerial Persons in excess of the limits prescribed by the Act. Further, in case of default by the company in payment of dues to any bank or public financial institution or non-convertible debenture holders or any other secured creditor (collectively the creditors), the prior approval of such creditors has to be obtained by the company before obtaining the approval of the shareholders.