The Statutory Designation
Key managerial personnel—the managing director, whole-time director, CEO, CFO, and company secretary—are statutory offices under Section 203. A person does not become a KMP merely because he is transferred as an employee. The transferee’s board must appoint the person to the KMP position, and the appointment must comply with the applicable provisions, including the audit committee’s recommendation where required.
The Scheme’s Employment Clause
The scheme’s employee-continuity clause transfers the transferor’s employees to the transferee “without any further act or deed.” That clause preserves the employment relationship, but it does not appoint the person to a KMP office. The scheme should expressly state whether the transferor’s KMP will be appointed to equivalent positions in the transferee, or whether their roles will be redefined.
The Board Resolution and Filings
The transferee’s board resolution should record the appointment of the KMP, the terms of remuneration, and the compliance with Section 203. The appointment must be filed with the ROC in Form DIR-12. A failure to file the DIR-12 leaves the KMP’s appointment unrecorded, even if the person is functioning in the role.
The Transition Risk
If the transferor’s KMP is not appointed in the transferee, the transferee may face a vacancy in a statutory office. The scheme should provide for an interim arrangement to avoid a gap. The board should also consider whether the transferor’s KMP is a “key managerial personnel” for the purposes of the transferee’s RPT and disclosure obligations, because the designation determines the related-party mapping.
Call to Action: For KMP transition planning, board resolution drafting, or DIR-12 filing, contact office@anujdesaiassociates.com or 9619456656. Website: https://anujdesaiassociates.com. LinkedIn: linkedin.com/in/ca-anuj-desai-122547230.