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Managing Director

Surbhi Jain (Service) (68 Points)

29 April 2009

Can a managing director of a public limited company be an employee of a foreign company as per the provisions of the Comapnies Act, 1956?

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6 Replies

Ankur Garg (Company Secretary and Compliance Officer) (114773 Points)
Replied 29 April 2009

Hi Surbhi,

No it is simply not possible. As M.D. is a key person for any company that's why there are verious provisions in the Companies Act, 1956 which govern the appointment and other relevant matters regarding the post of M.D.

But he may be M.D. of more then 1 company subject to the unanimously approval of Board of Directors as desired by Section 316 of the Companies Act, 1956.

Views of other learned members solicited.

Best Regards

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Surbhi Jain (Service) (68 Points)
Replied 29 April 2009

Thanks a lot for your prompt response.

Will the view remain same even if the MD remains in India only and does not do any work for the foreign company. However, he remains on the payroll of the foreign company and gets his salary (remuneration for working in Inida) from the foreign company only? The India company reimburses the cost of salary of MD to the foreign company.

Ankur Garg (Company Secretary and Compliance Officer) (114773 Points)
Replied 29 April 2009

Yes Surbhi, Unfortunately my view remains the same even if MD remain in India only.

As long as he is on the pay roll of the foreign company position will remain same as per my opinion.

Best Regards

Sangeet Hunjan (Company Secretary) (92 Points)
Replied 29 April 2009

Ankur Sir

I am not aware if the Companies Act prohibits such type of arrangement. I am not sure if it states that MD should be an employee. Please let me know if I am missing something, so I may stand corrected.

If the MD is will be working for the Indian Company and will be paid for it indirectly by the Indian Company (by way of reimbursement) then he fulfills his job as a key person. What I gather form Surbhi is that he may be an expatriate who has come to India and Central Government approval can always be obtained for if he doesn't meet the "resident of India" criterion of Sch XIII.

Please let me know your views.

Surbhi Jain (Service) (68 Points)
Replied 04 May 2009

HI Sangeet,

The application for obtaining Govt approval was made which is pending approval. The MD is employee of foreign only for the purpose of making contribution to social security system of the country of his Nationality. He has come to India on deputation for three year after which he would go back to the foreign company. Please let me know your views on any violation of the provisions of the Companies Act in such a scenario.

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Sangeet Hunjan (Company Secretary) (92 Points)
Replied 04 May 2009

Hello Surbhi

I know a similar case. But here the MD's salary is not being reimbursed by Indian Company and he is being paid by foreign company, The application to Central Government was made in November last year and they have replied now in April asking for some regular documents. So per se, I do not see any violation. And Central Government approval will take time I believe.