Whole-time KMP – Can a Single person hold two posts – Company Secretary and CFO in compliance of Section 203?

The Companies Act 2013 requires mandatory appointment of whole-time KMP in every listed company and every other public company having a paid-up share capital of Rs. 10 crore or more. An interesting question has arisen:

Can one person hold the position of CFO as well as Company Secretary(duly qualified) under the provisions of Section 203 of the Companies Act 2013?

Pursuant to the provisions of Section 203 of the Companies Act, 2013 every class of companies as prescribed shall be mandatorily required to have Key Managerial personnel. The relevant extract of the Section is reproduced hereinbelow:

203. (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 :

 The term Chief Financial Officer is defined under Section 2(19) of the Act which states that  “Chief Financial Officer” means a person appointed as the Chief Financial Officer of a company. No qualification of a CFO is thus prescribed.

There is no restriction under the CA 2013 or rules whereby a single person is debarred from holding dual post.

However, we cannot lose sight of Article 78 of the Table F of the Companies Act, 2013 ( corresponding to  Article 83 of Table A of the erstwhile Companies Act, 1956). The relevant Articles of the model Articles of Association are reproduced hereinbelow:

“Table A of the Companies Act, 1956

83. A provision of the Act or these regulations requiring or authorising a thing to be done by or to a director and the manager or secretary shall not be satisfied by its being done by or to the same person acting both as director and as, or in place of, the manager or secretary.”

“Table F of Companies Act, 2013

78. A provision of the Act or these regulations requiring or authorising a thing to be done by or to a director and chief executive officer, manager, company secretary or chief financial officer shall not be satisfied by its being done by or to the same person acting both as director and as, or in place of, chief executive officer, manager, company secretary or chief financial officer.”

The model articles imposes a restriction on appointment of a single person for dual posts as mandated under the Act. It clarifies the fact that if under the Act, a thing is required to be done specifically by director and chief executive officer, manager, company secretary or chief financial officer, then it shall not be satisfied by its being done by the same person acting both as Director and CFO or CS. 

Following points emerge:

1. If a company has such a prohibitory clause in its Articles, then a single person cannot hold dual post as CFO and Company Secretary.

2. Care should be taken to exclude clause 78 of Table F of CA 2013.

3. It is not mandatory to amend Articles to bring it in line with CA 2013 but the companies will do well to amend it in accordance with new Act so as to avoid any confusion. In such a case, the companies are advised to include a clause enabling a single person to hold dual post as KMP.

Note : This opinion is based on relevant facts for the opinion and is based on my personal interpretation of the provisions of the Companies Act, 2013. I undertake no responsibility for any non-compliance if reliance is placed on the aforesaid opinion.