THERE IS NO WRONG FOR A COMPANY TO APPOINT A SINGLE PERSON FOR DUAL ROLE OF CFO CUM WHOLE-TIME DIRECTOR? IS FINDINGS IN ROC GWALIOR VS EVKI ENERGY SERVICES LTD IS JUSTIABLE?

THERE IS NO WRONG FOR A COMPANY TO APPOINT A SINGLE PERSON FOR DUAL ROLE OF CFO CUM WHOLE-TIME DIRECTOR?

IS FINDINGS IN ROC GWALIOR   VS EVKI

 ENERGY SERVICES LTD IS JUSTIABLE?

WHETHER EVKI ENERGY SERVICES LTD

 CAN MAKE AN APPEAL TO REGIONAL

DIRECTOR TO REVERSE THE VERDICT 

OF ROC,GWALIOR?

As regards to my article regarding whether CAN A COMPANY APPOINT A SINGLE PERSON FOR DUAL ROLE OF CFO CUM WHOLE-m DIRECTOR? , I have cited that IN ROC GWALIOR   VS EVKI ENERGY SERVICES LTD IT is an offence as ROC Gwalior fined the company and the director for the lapse.

Many professionals have telephoned me and sent mails that there is no explicit provision in the Companies Act 2013 to bar the single person for the dual portfolio – CFO Cum Whole-time director.

CHIEF FINANCIAL OFFICER (CFO) AND A WHOLE-TIME DIRECTOR (WTD)

Yes, a company can appoint a single individual as both the Chief Financial Officer (CFO) and a Whole-Time Director (WTD), provided the Companies Act, 2013 and the company's Articles of Association permit it.

LEGAL POSITION UNDER THE COMPANIES ACT, 2013

·       Section 2(51) recognizes the Chief Financial Officer (CFO) as a Key Managerial Personnel (KMP).

·       Section 203 requires certain classes of companies to appoint whole-time KMPs, including a CFO.

·       The Companies Act does not prohibit the same individual from simultaneously holding the office of CFO and Whole-Time Director.

IS THERE ANY RESTRICTION?

The Act specifically prohibits only certain combinations, such as:

A company cannot appoint or employ both a Managing Director (MD) and a Manager simultaneously (except in limited circumstances under the Act).

There is no similar statutory prohibition against appointing one person as:

·       CFO and Whole-Time Director

·       CFO and Executive Director

CONDITIONS TO BE SATISFIED

A dual appointment should satisfy the following:

BOARD APPROVAL

The Board should approve both appointments through appropriate resolutions.

SHAREHOLDERS' APPROVAL

Where required, shareholders should approve the appointment of the Whole-Time Director.

COMPLIANCE WITH SECTION 196

If appointed as a Whole-Time Director, all provisions relating to age, tenure, remuneration, and eligibility must be complied with.

DISCLOSURE REQUIREMENTS

The dual designation should be properly disclosed in statutory filings, annual reports, and corporate records.

OTHER EXAMPLES WHERE FINANCE AND BOARD ROLES ARE COMBINED

Several listed companies have designated executives as:

·       Executive Director (Finance) & CFO

·       Whole-Time Director (Finance) & CFO

·       Director (Finance) & CFO

·       Joint Managing Director & CFO

These combinations have generally been accepted under the Companies Act, 2013, provided the appointments comply with Sections 196 and 203 and receive the necessary board/shareholder approvals.

PRECEDENTS

There are numerous Indian companies where the same individual has been appointed as Whole-Time Director (or Director-Finance) and Chief Financial Officer (CFO).

THESE EXAMPLES ARE PARTICULARLY RELEVANT TO THE EKI ENERGY ISSUE

If you are analysing the ROC Gwalior order in the EKI Energy Services Ltd. case, the above precedents are significant because they demonstrate that several listed and unlisted Indian companies have, in practice, appointed a single individual as:

·       Whole-Time Director & CFO;

·       Director (Finance) & CFO; or

·       Executive Director (Finance) & CFO.

These examples could therefore be examined while evaluating whether the ROC's interpretation is consistent with prevailing corporate practice and the language of Sections 196 and 203 of the Companies Act, 2013.

FINAL THOUGHTS

If EKI Energy Services Ltd is of the opinion that ROC Gwalior finding is inconsistent with the provisions of Companies Act ,2013 , it can appeal to the Regional Director of MCA to reverse the fine levied by ROC Gwalior.

# Your Knowledge partner R V Sekar 79047 19295,