Companies (Appointment and Remuneration of Managerial Personnel) Amendment Rules 2023

10 Feb, 2023

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The Ministry of Corporate Affairs or MCA recently notified the Companies (Appointment and Remuneration of Managerial Personnel) Amendment Rules of 2023 on 19 January 2023 to bring certain amendments to the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. The MCA has made the amendment in the exercise of its powers flowing from Section 196(4), Section 197(5) and (12), Section 198(1), Section 200, Section 203(1), Section 204(1), Section 205(1) and Section 469 (1) and (2) of the Companies Act of 2013. The Companies (Appointment and Remuneration of Managerial Personnel) Amendment Rules of 2023 came into effect on 23 January 2023.

The Companies (Appointment and Remuneration of Managerial Personnel) Amendment Rules of 2023 have substituted Form MR-1 and Form MR-2 present in the annexure of Companies (Appointment and Remuneration of Managerial Personnel) Rules of 2014 with amended versions of the same forms. This article attempts to analyse the amendments made.

The Companies (Appointment and Remuneration of Managerial Personnel) Rules of 2014 provide for the filing of return of appointment under Form number MR.1 with the Registrar of Companies, sitting fees to be paid directors attending board meetings, disclosures to be made in the board report pertaining to appointment and remuneration, parameters to be considered while paying remuneration, appointment key managerial personnel, secretarial audit report, duties of a company secretary among other things.

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Managerial Personnel

Section 197 of the Companies Act of 2013 deals with the maximum amount of managerial remuneration. It also gives an idea as to who all fall under the purview of the term “managerial personnel”. It shall include the directors, the managing director, the whole time director and the manager of the company.

Amendments via Companies (Appointment and Remuneration of Managerial Personnel) Amendment Rules, 2023

The Companies (Appointment and Remuneration of Managerial Personnel) Amendment Rules of 2023 modified Form number MR.1 and Form number MR.2. Form number MR.1 deals with the return to be filed with the Registrar of companies regarding the appointment of managerial personnel and Form number MR.2 contains the application which shall be made to the central government to obtain its approval appointment of a manager or managing director or a whole time director.

What is Form Number MR.1?

Form number MR.1 is titled “return of appointment of managerial personnel”. The law governing Form number MR.1 are Section 196 and Section 197 of the Companies Act of 2013 and Rule 3 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules of 2014. Form number MR.1 is required to be filed intimating the strong of the appointment of managerial personnel before the expiry of 60 days from the date of such appointment.

Section 196 of the Companies Act of 2013 deals with the appointment of a managing director, manager or whole time director of the company. The proviso to Section 196 states that the Registrar of the company shall be intimated of the appointment by filing the prescribed form before the expiry of 60 days from the date of such appointment.

Rule 3 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules of 2014 states that the return of appointment, which is required to be submitted with the Registrar of companies, as is provided under Section 196 of the Companies Act of 2013, shall be filed under Form number MR.1

Details to be filled in the amended form number MR.1

The below mentioned are the details which are required to be filed under Form MR.1:

Details of the entity, like name of the company, address of the company’s registered office and whether the company is a public company or a subsidiary of one.
Details of the key managerial personnel or the KMP: particulars of the person proposed appointee with respect to whom the application is being filed, including the name of such person, director identification number DIN the person being appointed as a director or the PAN or the membership number and designation of such person.
the date on which the resolution was passed by the board of directors
The date of appointment of such a person
The terms and conditions with respect to renovation and the tenure of appointment appointee
If the person being appointed is older than 70 years of age
Whether the appointee has been detained or convicted under any of the statutes mentioned under part one of schedule 5
Whether the appointee is a non resident, as provided in part one of schedule 5
Whether prior approval for the appointment of such a person has been obtained from the members in a general meeting, the date on when the resolution was passed, the special resolution number with respect to Form number MGT-14 for filing a special resolution, special resolution number for obtaining the approval from the central government (if applicable)
whether the person being appointed has been disqualified under section 164 of the Companies Act of 2013 for appointment of directors and details with respect to the disqualification.

Attachments which are required to be submitted along with form number MR.1

The below mentioned are attachments which are required to be submitted along with form number MR.1:

Copy of the board resolution
Copy of the certificate by the nomination and remuneration committee of the company certifying that provided is in accordance with the remuneration policy of the company.
any other optional attachment

In the previous version of Form number MR.1, a letter of consent of the appointment from the whole time director or manager or the managing director was also required. However, this requirement has been removed from the amended form.

The form is also required to be digitally signed by either the director or manager or CEO or CFO, or company secretary, along with the declaration that the board of directors has appointed such person to sign the form, to declare that all the requirements under the Companies Act of 2013 and Companies (Appointment and Remuneration of Managerial Personnel) Rules of 2014 have accurately been met with and that all the information provided under the form is accurate, genuine and complete and no material information in relation to this form has been suppressed.

The form is also required to be certified by a cost accountant in practice or a company secretary, or a chartered accountant in practice. Such person shall declare that she has been duly appointed to certify this form and that she has gone through the contents of the form, and that all the requirements under the Companies Act of 2013 and Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 have sufficiently been met with and that all the information provided under the form is accurate, genuine and complete and no material information in relation to this form has been suppressed.

What is Form Number MR.2? – Companies (Appointment and Remuneration of Managerial Personnel) Amendment Rules of 2023

Form number MR.2 is titled “form of application to central government for the approval of appointment of managing director/whole time director/manager”. The law governing Form number MR.2 is Schedule V and Section 196 of the Companies Act of 2013 and Rule 7 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules of 2014.

Section 196 of the Companies Act of 2013 deals with the appointment of a managing director, manager or whole time director of the company. Section 196 (4) states that the managing director, manager or whole time director of the company shall be appointed the terms and conditions with respect to appointment, and the remuneration payable shall be approved by the board of directors to add a meeting which shall require approval through a resolution passed a general meeting of the company. The approval of the central government if the appointment made is at variance with the conditions which have been specified in part one of schedule 5. Part 1 of Schedule 5 provides for the conditions which are required to be fulfilled while appointing a managing director or the whole time director or a manager without the prior approval of the central government.

Rule 7 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules of 2014 states that any application made to the central government under chapter 13 shall be made under Form number MR.2 longer prescribed fee. Every such application shall be made by the Central Government before the expiry of 90 days from the date of the appointment.

Form number MR.2 is filed to seek the approval of the central government when a managing director or a manager or whole time director has been appointed without compliance with the conditions mentioned under Part one of Schedule 5 to the Companies Act of 2013.

It is also filed when a person older than 70 years of age is appointed as either the managing director or a manager or whole time director without passing a special resolution as mandated under Section 197 of the Companies Act of 2013. Section 197 states that the person employed as a manager or managing director, or whole time director shall not be older than 70 years of age. However, the proviso to the Section mentions that a person older than 70 years of age may be appointed so by passing a special resolution. If a special resolution, as discussed above, is not passed but votes in favour of appointing such a person surpass the number of votes against such appointment, then this form can be filed to obtain the approval of the central government, after which such appointment shall be made.

Details to be filled in the amended form number MR.2

The below mentioned are the details which are required to be filed under Form MR.2:

Details of the entity like the name of the company, address of the company’s registered office, email ID of the company, whether such company is a public company or the subsidiary of one, whether the company is a listed company, the number of stock exchanges on which it has been listed, name of the Stock Exchange
The reason behind the form being filed: whether the form is being filed to seek the approval of the Central Government in cases when the appointment is not in compliance with Part one of Schedule 5 or the age of the person being appointed is more than 70 years, and no special resolution has been passed in this regard, or the person is a non resident.
Details of the key managerial personnel or the KMP: particulars of the person proposed appointee with respect to whom the application is being filed, including the name of such person, director identification number DIN the person being appointed as a director or the PAN or the membership number and designation of such person, father’s name, nationality, educational and professional qualifications of the proposed appointee or the person for whom the application is being filed along with a brief profile, post qualification experience in years and months.
The person being appointed is a foreign citizen, then the person’s country of origin, passport number, the validity of the passport and occupation of such person.
Selecting the statutes mentioned in Part one Schedule 5 of the Companies Act of 2013, which the appointment hasn’t been in compliance with, along with the Section and the statute under which the person being appointed was convicted or detained
whether the person being appointed suffers from any disqualification under Section 164 of the Companies Act of 2013 for appointment of directors and details with respect to the disqualification.
Details pertaining to the acts which have been committed by the person being appointed due to which the qualification occurred and the justification for such appointment.
the date on which the resolution was passed by the board of directors
, the special resolution number with respect to form number MGT-14
The date on which the resolution was passed by the remuneration hand nomination committee
details of any application that may be pending before the National Company Law Tribunal or the National Company Law Appellate Tribunal under the Insolvency and Bankruptcy Code of 2016.

Attachments which are required to be submitted along with form number MR.2

Below mentioned are the attachments which are required to be submitted along with form number MR.2:

A certified copy of the resolution, along with its minutes, passed by the nomination and remuneration committee. Details regarding the composition of the committee, including the name and designation of the chairman and each member, shall also be provided.
Certified copy of the Resolution in support of the proposal passed by the board of directors
Copy of the notices published in a daily newspaper in the English language and a daily newspaper in the vernacular language of the district where the company’s registered office is situated in accordance with section 201 (2) of the Companies Act of 2013
if the person being appointed is a foreign national, then the certified copy of the employment visa/PIO card/ OCI, along with the passport for the period of her tenure in India.
copy of any earlier rejections or approval from the central government obtained in the last three years
Certified copy of the resolution, which has been passed by the shareholders of the company in support of the proposal and requisite notices which were sent, an explanatory statement in accordance with Section 102 of the Companies Act of 2013.
If the Company general meeting was not convened by providing 21 day notice either in electronic mode or in writing, then a certified copy of the consent for convening general meetings on short notice as provided under section 101 and section 136 of the Companies Act of 2013 A list of the company’s shareholders
An auditors certificate in accordance with section 164(2) of the Companies Act of 2013
any other optional attachment

The form is required to be certified by a chartered accountant in practice cost accountant in practice, or a company secretary in practice. Such person shall declare that she has been duly appointed to certify this form and that the nomination and remuneration committee agent compliance with the provisions of Section 178 (1), (2), (3) and (4) of the Companies Act out 2013, compliance with Section 196 and Section 203 (3) of the Companies Act of 2013. In case it is a listed company, then compliance with the SEBI (LODR) regulation of 2015 in accordance with circulars issued by SEBI from time to time.

The form is also required to be digitally signed by either the director or manager or CEO or CFO, or company secretary, along with the declaration that such person has been appointed by the board of directors to sign the form, to declare that all the requirements under the Companies Act of 2013^[1] and Companies (Appointment and Remuneration of Managerial Personnel) Rules of 2014 have sufficiently been met with and that all the information provided under the form are true, genuine and complete and no material information in relation to this form has been suppressed.

Conclusion

The MCA recently notified the Companies (Appointment and Remuneration of Managerial Personnel) Amendment Rules of 2023 to amend the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, and the amendment shall be effective from 23 January 2023. The Companies (Appointment and Remuneration of Managerial Personnel) Amendment Rules, 2023 modified Form number MR.1 and Form number MR.2. Form number MR.1 deals with the return to be filed with the Registrar of companies regarding the appointment of managerial personnel and Form number MR.2 contains the application which shall be made to the central government to obtain its approval appointment of a manager or managing director or a whole time director.

Read our Article:Appointment Of Key Managerial Personnel

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