Chapter XIII - Appointment and Remuneration of Managerial Personnel
Section 203
Section 203: appointment of key managerial personnel
Prescribed classes of companies must have three kinds of whole-time key managerial personnel: a managing director, Chief Executive Officer or manager (or, in their absence, a whole-time director); a company secretary; and a Chief Financial Officer.
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This article is for general information. Refer to the Companies Act, 2013 official text for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
(1) Every company belonging to such class or classes of companies as may be prescribed shall have the following whole-time key managerial personnel,— (i) managing director, or Chief Executive Officer or manager and in their absence, a whole-time director; (ii) company secretary; and (iii) Chief Financial Officer: Provided that an individual shall not be appointed or reappointed as the chairperson of the company, in pursuance of the articles of the company, as well as the managing director or Chief Executive Officer of the company at the same time after the date of commencement of this Act unless,— (a) the articles of such a company provide otherwise; or (b) the company does not carry multiple businesses: Provided further that nothing contained in the first proviso shall apply to such class of companies engaged in multiple businesses and which has appointed one or more Chief Executive Officers for each such business as may be notified by the Central Government. (2) Every whole-time key managerial personnel of a company shall be appointed by means of a resolution of the Board containing the terms and conditions of the appointment including the remuneration. (3) A whole-time key managerial personnel shall not hold office in more than one company except in its subsidiary company at the same time: Provided that nothing contained in this sub-section shall disentitle a key managerial personnel from being a director of any company with the permission of the Board: Provided further that whole-time key managerial personnel holding office in more than one company at the same time on the date of commencement of this Act, shall, within a period of six months from such commencement, choose one company, in which he wishes to continue to hold the office of key managerial personnel: Provided also that a company may appoint or employ a person as its managing director, if he is the managing director or manager of one, and of not more than one, other company and such appointment or employment is made or approved by a resolution passed at a meeting of the Board with the consent of all the directors present at the meeting and of which meeting, and of the resolution to be moved thereat, specific notice has been given to all the directors then in India. (4) If the office of any whole-time key managerial personnel is vacated, the resulting vacancy shall be filled-up by the Board at a meeting of the Board within a period of six months from the date of such vacancy. (5) If any company makes any default in complying with the provisions of this section, such company shall be liable to a penalty of five lakh rupees and every director and key managerial personnel of the company who is in default shall be liable to a penalty of fifty thousand rupees and where the default is a continuing one, with a further penalty of one thousand rupees for each day after the first during which such default continues but not exceeding five lakh rupees.
Introduction
An individual cannot be the chairperson and also the managing director or Chief Executive Officer at the same time. This does not apply if the articles provide otherwise or the company does not carry on multiple businesses. A notified class of multi-business companies that has appointed Chief Executive Officers for each business is also excluded.
Whole-time key managerial personnel are appointed by a Board resolution containing their terms, including remuneration. They cannot hold office in more than one company at a time, except in a subsidiary, though they may be directors elsewhere with the Board's permission. Vacancies must be filled by the Board within six months. Penalties for default were substituted by the Companies (Amendment) Act, 2019, deemed in force from 2 November 2018.
Key takeaways
Three roles
A managing director, Chief Executive Officer or manager (or a whole-time director), a company secretary and a Chief Financial Officer.
One company
Whole-time key managerial personnel hold office in one company only, except in its subsidiary.
Six months
The Board must fill a vacancy at a Board meeting within six months.
Confirm the requirement and appoint
Check whether the company belongs to a class prescribed under subsection (1). If it does, appoint each whole-time key managerial personnel by a Board resolution that sets out the terms and conditions, including remuneration.
Apply the chairperson rule
After the Act commenced, an individual cannot be appointed or re-appointed as both chairperson and managing director or Chief Executive Officer at the same time. This does not apply if the articles provide otherwise or the company does not carry on multiple businesses. It also does not apply to a class of multi-business companies, notified by the Central Government, that has appointed one or more Chief Executive Officers for each business.
Check the restrictions on multiple offices
A whole-time key managerial personnel cannot hold office in more than one company at a time, except in its subsidiary, but may be a director of any company with the Board's permission. A company may appoint as its managing director a person who is managing director or manager of one, and only one, other company. That appointment needs a Board resolution passed with the consent of all directors present, after specific notice to all directors then in India.
Fill vacancies and know the penalties
If a whole-time key managerial personnel's office falls vacant, the Board must fill it at a Board meeting within six months.
Subsection (5) was substituted by section 30 of the Companies (Amendment) Act, 2019, deemed in force from 2 November 2018. A company in default is liable to a penalty of five lakh rupees. Every director and key managerial personnel in default is liable to fifty thousand rupees. A continuing default adds one thousand rupees a day after the first, up to five lakh rupees.
Check class-specific exemptions
The MCA e-book for the Act lists a modification notification under this section for Government companies. Read the current notification before applying the general rule to those companies.
Practical preparation
Check whether the company is in a prescribed class; appoint each role by Board resolution with its terms; check the chairperson and managing director combination; confirm each appointee's other offices; fill any vacancy within six months.
Practical checklist
Do
- Record the terms of each appointment, including remuneration, in the Board resolution.
- Track any vacancy against the six-month limit.
Avoid
- Do not let whole-time key managerial personnel hold office in another company, other than a subsidiary.
- Do not combine chairperson and managing director roles unless an exception applies.
Illustrative example
Hypothetical: Chief Financial Officer resigns
The Chief Financial Officer of a company in a prescribed class resigns.
Record
Note the date the vacancy arose.
Appoint
Hold a Board meeting to appoint a successor by resolution setting out the terms, within six months.
Check
Confirm that the successor does not hold key managerial personnel office in another company, other than a subsidiary.
Outcome
- A timely appointment avoids the penalties under section 203(5).
Glossary
- Whole-time key managerial personnel
- The roles listed in section 203(1) that prescribed companies must fill on a whole-time basis.
- Chairperson
- The chair appointed under the articles, whose combination with the managing director or Chief Executive Officer role is restricted.
Frequently asked questions
How quickly must a vacancy be filled?
Within six months from the date of the vacancy, by the Board at a Board meeting.
Can a company secretary also be a director of another company?
Yes, with the Board's permission. The second restriction concerns holding office as whole-time key managerial personnel in more than one company, other than a subsidiary.
Need help applying this provision to your situation?
Contact BizeneedLast updated 11 October 2026