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Company Law and Practice · Key Managerial Personnel and their Remuneration

Appointment of Key Managerial Personnel under Section 203

Updated 11 October 2026 · Fact-checked

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

Understand Appointment of KMP under Section 203

Key managerial personnel (KMP) are the senior officers who run a company day to day. Section 203 deals with the whole-time KMP: who must be appointed, how, and what happens when a post falls vacant.

The section applies to every company belonging to such class or classes as may be prescribed. The Act itself does not list the companies. The Rules do. So in your answer, say that the company must fall in the prescribed class, and do not invent thresholds you are not sure of.

The 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 the first post is a choice among alternatives, while the company secretary and CFO are separate posts.

Each whole-time KMP is appointed by a resolution of the Board that contains the terms and conditions of appointment, including remuneration. A whole-time KMP cannot hold office in more than one company at the same time, except in its subsidiary company. If a post falls vacant, the Board must fill it at a Board meeting within six months from the date of vacancy.

Default attracts a penalty: the company and every director and KMP in default are liable under sub-section (5), with a further daily penalty for continuing default.

Key rules to remember

Whole-time KMP required (s.203(1))
(MD or CEO or manager; if none, a whole-time director) + Company Secretary + CFO
Applies to companies of the prescribed class or classes. Three posts to fill.
Mode of appointment (s.203(2))
Board resolution stating terms and conditions, including remuneration
Not a general meeting resolution under s.203. The Board resolution must state remuneration.
Multiple offices (s.203(3))
Whole-time KMP: office in only one company, except its subsidiary
A KMP may still be a director of any company with the Board's permission.
Vacancy (s.203(4))
Board fills the vacancy at a Board meeting within 6 months from the date of vacancy
Time runs from the date the post fell vacant.
Chairperson and MD/CEO (first proviso to s.203(1))
Same person cannot be chairperson and MD/CEO unless (a) articles provide otherwise, or (b) company does not carry multiple businesses
A further proviso exempts notified classes of multi-business companies that have appointed one or more CEOs for each business.
MD of two companies (third proviso to s.203(3))
A person may be MD or manager of one, and not more than one, other company, if approved by Board resolution with consent of all directors present
Specific notice of the meeting and resolution must be given to all directors then in India.
Penalty (s.203(5))
Company: ₹5,00,000. Each director and KMP in default: ₹50,000. Continuing default: ₹1,000 per day after the first, subject to a limit of ₹5,00,000
The daily penalty is capped at ₹5,00,000.
Return of appointment (s.170(2))
File return with Registrar within 30 days of appointment and within 30 days of any change
Section 170(1) also requires a register of directors and KMP at the registered office.

How to solve Appointment of KMP under Section 203 questions

Use the same structure for every Section 203 question: provision, facts, conclusion.

  1. 1Read the facts and list every post mentioned: MD, CEO, manager, whole-time director, company secretary, CFO.
  2. 2Check whether the company is of the prescribed class. If the question does not say so, state that Section 203 applies only to such companies.
  3. 3Check the three required posts. Remember that a whole-time director is needed only where there is no MD, CEO or manager.
  4. 4Check the mode of appointment: a Board resolution with terms and remuneration.
  5. 5Check the multiple-office rule, and the chairperson and MD/CEO rule with its exceptions.
  6. 6If a vacancy is mentioned, count six months from the date of vacancy and check that the Board filled it at a meeting.
  7. 7Check the later filing duty under Section 170 and the penalty under Section 203(5) if there is default.
  8. 8Write the conclusion clearly: compliant or not, and the consequence.

Quickest way: Three posts, one resolution, six months

When to use it: Use for short-answer or case questions where time is tight.

  1. Count the posts: MD/CEO/manager, CS, CFO.
  2. Ask: was there a Board resolution with remuneration?
  3. Ask: does anyone hold office in two companies? Only a subsidiary is allowed.
  4. Ask: how long has a post been vacant? More than six months is a default.
  5. Write the section number with each point and end with the penalty if there is a default.

Common mistakes in Appointment of KMP under Section 203

  • Saying every company must appoint whole-time KMP.

    Students forget the words 'such class or classes of companies as may be prescribed'.

    Fix: Always write that Section 203 applies to companies of the prescribed class.

  • Saying a whole-time director is always required.

    The first post lists four designations and students treat all as compulsory.

    Fix: A whole-time director is needed only in the absence of an MD, CEO or manager.

  • Saying KMP appointment needs a general meeting resolution.

    Students mix it with director appointment.

    Fix: Section 203(2) requires a Board resolution containing the terms, including remuneration.

  • Saying a whole-time KMP can never hold office elsewhere.

    The exception for a subsidiary and the provisos are missed.

    Fix: State the rule, the subsidiary exception, the director-with-Board-permission proviso and the MD of one other company proviso.

  • Allowing the vacancy to be filled by the members or in a flexible time.

    Confusion with casual vacancy of auditors or directors.

    Fix: Under Section 203(4), the Board fills it at a Board meeting within six months from the date of vacancy.

  • Treating the chairperson and MD/CEO bar as absolute.

    Students remember only the prohibition.

    Fix: Add the exceptions: the articles provide otherwise, or the company does not carry multiple businesses.

Worked examples

Example 1

The CFO of Sundaram Textiles Ltd., a company of the prescribed class, resigned on 1 March. The Board appointed a new CFO by a Board resolution passed on 15 September of the same year. Has the company complied with Section 203?

Show the solution
  1. Provision: under Section 203(4), if the office of any whole-time KMP is vacated, the Board must fill it at a Board meeting within six months from the date of vacancy.
  2. Facts: the vacancy arose on 1 March. Six months ends on 1 September.
  3. The appointment was made on 15 September, which is after the six-month period.
  4. Section 203(2) was met in form if the resolution stated terms and remuneration, but the time limit was missed.

Answer: No. The appointment was made after the six-month limit, so the company has defaulted under Section 203(4). The company and every director and KMP in default are liable to penalty under Section 203(5).

Example 2

Ravi is the company secretary of Alpha Ltd. He is also appointed as company secretary of Beta Ltd., which is not a subsidiary of Alpha Ltd. Both are of the prescribed class. Is this permitted?

Show the solution
  1. Provision: under Section 203(3), a whole-time KMP shall not hold office in more than one company at the same time, except in its subsidiary company.
  2. Facts: Ravi would hold the office of company secretary in two companies. Beta Ltd. is not a subsidiary of Alpha Ltd.
  3. The proviso allowing a KMP to be a director of another company with the Board's permission covers a directorship only, not a second KMP office.
  4. The proviso for an MD of one other company applies only to a managing director, not to a company secretary.

Answer: No. Ravi cannot hold the office of company secretary in both companies because Beta Ltd. is not a subsidiary of Alpha Ltd. He may serve as KMP in only one of them. He could, with the Board's permission, be a director of another company.

Exam tips

  • Quote the key words of Section 203(4): six months, Board, Board meeting, vacancy date.
  • In case studies, first check whether the company is of the prescribed class and say so.
  • Learn the three provisos to sub-section (3) separately, and the two provisos to sub-section (1). They are favourite short-note areas.
  • Always state the penalty amounts for the company and the officers in default, including the cap on daily penalty.
  • End each answer with a clear conclusion: complied or defaulted.

Practice questions from Key Managerial Personnel and their Remuneration

Appointment of KMP under Section 203 in other exams

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

Appointment of KMP under Section 203: 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 Act leaves the classes to the Rules, so check the prescribed class given in the question or the Rules.

Can one person be MD and CEO under Section 203?

The Act lists managing director, Chief Executive Officer or manager as alternatives for one post. The first proviso bars the same person from being chairperson and MD/CEO at the same time, unless the articles provide otherwise or the company does not carry multiple businesses.

Within what time 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. Failure is a default under Section 203(5).

How is a KMP appointed?

By a Board resolution that contains the terms and conditions of appointment, including remuneration. After appointment, a return must be filed with the Registrar within thirty days under Section 170(2).