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Who is the Chief Executive Officer of a Company?

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Who is the Chief Executive Officer of a Company ?

Chief Executive Officer of a company is an important person that everyone in the entity looks upon to for guidance and motivation. He heads a company and is responsible for its day-to-day activities. A Chief Executive officer as per Section 2(18) of Companies Act, 2013 is an officer of a company who has been appointed by it.

The Act also expressly states that a Chief Executive Officer (CEO) is a key managerial personnel of a company. Unlike the previous Companies Act, the new one has widened the ambit of key managerial personnel and has included CEO along with Chief Financial Officer, Company Secretary and a few others in its definition.

Key Managerial Personnel

As per Section 2(51) of the Act, a key managerial personnel of a company means

  1. The managing director (MD) or manager or CEO
  2. The company secretary
  3. The chief financial officer
  4. The whole time director(s)
  5. Or any other officer as may be prescribed

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Appointment of CEO

Registration of private limited company doesn't require mandatory appointment of a CEO. But as per Section 203 the Act and Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 every listed company and a public company with a paid-up share capital of ₹10 crores or more must appoint a Chief Executive Officer or Managing Director, whole time director, Chief Financial Officer and a company secretary.

The CEO and other whole-time key managerial personnel shall be appointed by the Board of directors. All the terms and conditions related to their appointments shall also be decided by the Board. In case of casual vacancy the post of the key managerial personnel shall be filled by the Board within 6 months of such vacancy.

Restrictions regarding appointment as CEO 

Companies Act, 2013 restricts appointment of Chairman of a company as CEO or MD of a person except if

  1. the Articles of the company permit such appointment
  2. The company is involved only in one business
  3. The company has diversified interests and has appointed multiple CEOs.

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