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Business Laws and Ethics · Key Managerial Personnel

Appointment and Mandatory KMP in Companies under Section 203

Updated 10 October 2026 · Fact-checked

Section 203 of the Companies Act, 2013 requires prescribed classes of companies to have whole-time KMP: a managing director, CEO, manager or (in their absence) a whole-time director, plus a company secretary and a CFO. The Board appoints each by resolution stating terms and remuneration. A vacancy must be filled by the Board within six months.

Understand Appointment and Mandatory KMP in Companies

Key managerial personnel (KMP) are the senior officers who run a company day to day. Section 203 deals with who must be appointed and how.

The section applies to companies belonging to such class or classes as may be prescribed. So you do not say every company must appoint KMP. You say the prescribed classes must. The text you are given does not list these classes, so in the exam state that they are as prescribed under the rules.

The mandatory whole-time KMP are three: (i) the managing director, or Chief Executive Officer or manager, and in their absence a whole-time director; (ii) the company secretary; and (iii) the Chief Financial Officer. Note that the first slot is one post, filled by any one of MD, CEO or manager, with a whole-time director as the fallback.

The section also has a rule on combining roles. A person cannot be appointed or reappointed as chairperson (under the articles) and as MD or CEO at the same time, unless the articles provide otherwise or the company does not carry multiple businesses. A further proviso says this does not apply to notified classes of companies engaged in multiple businesses that have appointed one or more CEOs for each business.

Related Section 196 adds that no company shall appoint or employ a managing director and a manager at the same time. So MD and manager together is barred, though a company may have a CEO and an MD under the wording of Section 203 as the first slot is satisfied by any of them.

Key rules to remember

Mandatory whole-time KMP (s. 203(1))
MD or CEO or manager (else whole-time director) + Company Secretary + CFO
Applies to prescribed classes of companies only.
Mode of appointment (s. 203(2))
Board resolution stating terms and conditions, including remuneration
Applies to every whole-time KMP.
Holding office in more than one company (s. 203(3))
Not more than one company, except its subsidiary company
A KMP may be a director of any company with Board permission. A company may appoint as MD a person who is MD or manager of one and not more than one other company, by Board resolution with consent of all directors present, after specific notice to all directors then in India.
Filling a vacancy (s. 203(4))
Board meeting; within 6 months from the date of vacancy
Applies to whole-time KMP offices.
Chairperson and MD/CEO (first proviso)
Same person cannot be both, unless articles provide otherwise or company does not carry multiple businesses
Does not apply to notified multiple-business companies that have appointed a CEO for each business.
Penalty (s. 203(5))
Company: ₹5,00,000. Each director and KMP in default: ₹50,000, plus ₹1,000 per day after the first for continuing default, capped at ₹5,00,000
The daily penalty cap applies to the further penalty.
MD and manager (s. 196(1))
No company shall appoint or employ at the same time a managing director and a manager
Separate section, often asked together with s. 203.
Register and return (s. 170(2))
Return of KMP to Registrar within 30 days of appointment and within 30 days of any change
Section 170(1) requires a register at the registered office.

How to solve Appointment and Mandatory KMP in Companies questions

Use this method for any question on mandatory KMP, appointment or vacancy.

  1. 1Identify whether the company falls in a prescribed class. If the facts do not say so, state that Section 203 applies to prescribed classes.
  2. 2List the three mandatory posts: MD or CEO or manager (else whole-time director), company secretary, CFO. Check which are missing.
  3. 3Check how appointment was made. It must be by Board resolution with terms and remuneration.
  4. 4Check multiple roles: holding office in more than one company, chairperson plus MD/CEO, and MD plus manager (s. 196).
  5. 5If a post fell vacant, count six months from the date of vacancy and check the Board filled it at a Board meeting.
  6. 6Apply the penalty in s. 203(5) if there is default, giving the company and officer amounts separately.
  7. 7Close with a one-line conclusion that answers the exact question asked.

Quickest way: Three posts, one resolution, six months

When to use it: Use for MCQs and short case questions where you must decide quickly whether the company has complied.

  1. Count the posts: one top executive (MD, CEO, manager or WTD), one CS, one CFO.
  2. Ask: was it a Board resolution? If a general meeting alone appointed them, that is not the s. 203(2) mode.
  3. Ask: how long has the post been vacant? Beyond six months means default.
  4. Ask: is any person holding two incompatible roles (MD and manager, or chair and MD/CEO without an exception)?

Common mistakes in Appointment and Mandatory KMP in Companies

  • Saying every company must appoint KMP under Section 203.

    Students remember the three posts and forget the opening words.

    Fix: Write that the section applies to such class or classes of companies as may be prescribed.

  • Treating MD, CEO and manager as three separate mandatory posts.

    The list looks like three items.

    Fix: They are alternatives for one slot. A whole-time director fills it only in their absence.

  • Counting the six-month vacancy period from the date of the Board meeting or from when the Board learnt of it.

    Students think of the meeting as the starting point.

    Fix: The period runs from the date of the vacancy. The Board must fill it at a Board meeting within that period.

  • Saying a whole-time KMP can never be a director of another company.

    The no-more-than-one-company rule is remembered without its provisos.

    Fix: A KMP may be a director of any company with the Board's permission. Holding office as KMP in a subsidiary is also allowed.

  • Mixing up the penalty amounts.

    Three figures appear in one sub-section.

    Fix: Company ₹5,00,000. Each director and KMP in default ₹50,000, plus ₹1,000 per day after the first for continuing default, up to ₹5,00,000.

  • Saying the chairperson and MD/CEO rule is an absolute ban.

    The exceptions sit in a proviso.

    Fix: Mention both exceptions: articles provide otherwise, or the company does not carry multiple businesses. Add the notified multiple-business exemption.

Worked examples

Example 1

Sunrise Textiles Ltd, a company of a prescribed class, has an MD and a CFO. Its company secretary resigned on 1 March. On 15 October the Board appointed a new company secretary by resolution. Has the company complied with Section 203?

Show the solution
  1. The company is of a prescribed class, so it must have an MD or CEO or manager, a company secretary and a CFO.
  2. The MD and CFO posts are filled. The company secretary post fell vacant on 1 March.
  3. Under s. 203(4) the Board must fill the vacancy at a Board meeting within six months from the date of vacancy.
  4. Six months from 1 March ends on 1 September.
  5. The appointment on 15 October is after that date, so it is late by about six weeks.
  6. The appointment was by Board resolution, which is the correct mode, but the time limit was missed.

Answer: No. The vacancy should have been filled by 1 September. The company is in default and is liable to the penalty in s. 203(5): ₹5,00,000 on the company, ₹50,000 on each director and KMP in default, and ₹1,000 for each day after the first of continuing default, capped at ₹5,00,000.

Example 2

Meera Industries Ltd wants to appoint Mr. Rao as its managing director and also employ Mr. Iyer as its manager. Mr. Rao is already the managing director of one other company. Advise the company.

Show the solution
  1. Section 196(1) says no company shall appoint or employ at the same time a managing director and a manager.
  2. So Meera Industries cannot have both Mr. Rao as MD and Mr. Iyer as manager.
  3. On Mr. Rao: s. 203(3) allows a company to appoint a person as MD if he is the MD or manager of one, and not more than one, other company.
  4. Mr. Rao holds that post in one other company, so he is within the limit.
  5. The appointment must be made or approved by a Board resolution passed with the consent of all directors present, after specific notice of the meeting and resolution to all directors then in India.

Answer: The company cannot appoint both an MD and a manager at once. It may appoint Mr. Rao as MD, since he is MD of only one other company, provided the Board resolution has the consent of all directors present and the required specific notice was given.

Exam tips

  • Write the section number with the heading: s. 203 for mandatory KMP, s. 196 for MD, WTD and manager, s. 170 for register and return.
  • In MCQs, watch for the numbers: six months for vacancy, thirty days for the return, five years maximum term under s. 196(2).
  • In case questions, state the rule first, apply it to the dates or roles given, then conclude.
  • Always mention the penalty amounts when the facts show a default, with the company and officer figures separate.
  • Do not claim a list of prescribed classes beyond what the question gives you. Say as prescribed.

Practice questions from Key Managerial Personnel

Appointment and Mandatory KMP in Companies in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Appointment and Mandatory KMP in Companies: frequently asked questions

Which companies must appoint whole-time KMP under Section 203?

Companies belonging to such class or classes as may be prescribed. The section itself does not list them, so you state that the prescribed classes must have an MD or CEO or manager (else a whole-time director), a company secretary and a CFO.

Within how many days or months must a vacancy in a KMP office be filled?

The Board must fill it at a Board meeting within six months from the date of the vacancy. This applies to whole-time KMP offices under s. 203(4).

Can one person be MD and manager at the same time?

No. Section 196(1) says no company shall appoint or employ at the same time a managing director and a manager. Section 203 lets the first slot be filled by an MD, a CEO or a manager, so one of them is enough.

Can the same person be chairperson and MD or CEO?

Not at the same time, unless the articles provide otherwise or the company does not carry multiple businesses. The rule also does not apply to notified classes of multiple-business companies that have appointed one or more CEOs for each business.

How is a whole-time KMP appointed?

By a resolution of the Board that contains the terms and conditions of appointment, including remuneration. This is required by s. 203(2).