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Is Managing Director an Employee of the Company?

Question: Is Managing Director an Employee of the Company ? 

Answer: Yes.


Meaning of a Managing Director is given in section 2(53) of the Companies Act, 2013 (earlier defined under section 2(26) of the Companies Act, 1956).

A Managing Director is a director,
  • by virtue of the articles of association of a company or 
  • by an agreement with the company or 
  • by a resolution passed in its general meeting of shareholders, or by its Board of Directors, 
  • is entrusted with substantial powers of management of the affairs of the company and 
  • includes a director occupying the position of managing director, by whatever name called.

Not every Directors of a company are employee of a company. But every Managing Director of a company is an employee of that company.

A Managing Director of a company plays dual role for his company 
  1. as a Director
  2. as an Employee i.e. as a Manager.
Generally, a company enters into a service contract with the Managing Director for his appointment and terms of remuneration. This contract is a contract of employment.

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