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A curated and categorised database of common questions regarding the law.


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1 What are the different type of employment contracts permitted (permanent contracts, short term contracts, temporary workers, etc.)?

Employers and Employees are free to agree to any length of contract either for a fixed term or an indefinite term, terminable on notice as stipulated in the contract. If the contract is not for a fixed term and does not state the period of notice required, the contract can be terminated by giving reasonable notice.
2 What are the different type of employment contracts permitted (permanent contracts, short term contracts, temporary workers, etc.)?

Employers and Employees are free to agree to any length of contract either for a fixed term or an indefinite term, terminable on notice as stipulated in the contract. If the contract is not for a fixed term and does not state the period of notice required, the contract can be terminated by giving reasonable notice.
3 Is short term employment legally possible? Is there any limitation regarding the period of such employment?

Yes, short term employment is legally permissible. There is no restriction on employment on a series of short term contracts. However, someone employed on a series of or a single short term contract on a specified term for a period of 240 days of more may nevertheless establish continuity of employment, and if employed in the same job under these circumstances might plead that the job is of a permanent nature thus rending the company liable to permanently employing that person or going through the retrenchment procedure involving various government authorities.
4 Is short term employment legally possible? Is there any limitation regarding the period of such employment?

Yes, short term employment is legally permissible. There is no restriction on employment on a series of short term contracts. However, someone employed on a series of or a single short term contract on a specified term for a period of 240 days of more may nevertheless establish continuity of employment, and if employed in the same job under these circumstances might plead that the job is of a permanent nature thus rending the company liable to permanently employing that person or going through the retrenchment procedure involving various government authorities.
5 Can there be part time employment contracts?

Yes. A contract of employment can be for any number of hours a week on a part time basis.
6 Can there be part time employment contracts?

Yes. A contract of employment can be for any number of hours a week on a part time basis.
7 Can employees be hired for an indefinite time period but bound to the execution and completion of a given work project or study?

Yes. A contract could be stated to be for the duration of a particular project and to end on its completion. The contract would need to be clear on the definition of the term completion. It is also possible to bind the employee to the concerned project until completion or take suitable action against the employee in case of default.
8 Can employees be hired for an indefinite time period but bound to the execution and completion of a given work project or study?

Yes. A contract could be stated to be for the duration of a particular project and to end on its completion. The contract would need to be clear on the definition of the term completion. It is also possible to bind the employee to the concerned project until completion or take suitable action against the employee in case of default.
9 How is a managing director or a high level executive hired?

As per Indian Law, the Managing Director of a company has been defined as a Director who has been entrusted with substantial powers of management, and who exercises his powers subject to superintendence, control and direction of the Company's Board of Directors. (Sec 2(26)-Companies Act, 1956). Sec 197A also states that there cannot be a Managing Director and a Manager in the same company where a Manager is defined as an individual who has the management of the whole or substantially the whole of the affairs of the company and he must be subject to superintendence, control and direction of the Company's Board of Directors. (Sec 2(24)-Companies Act, 1956). High level executives with designations such as President/Vice President may fall under this definition.
A Managing Director can be appointed in one of 5 ways:
i) Agreement with the company
ii) Resolution passed by the company in a general meeting
iii) Resolution passed by the Board of Directors
iv) Memorandum of Association
v) Articles of Association

A Manager may be appointed by the Board for such term or remuneration as it may think fit.
However, a person has to necessarily be a Director of the company to be a Managing Director and there can be more than one Managing Director. A manager need not be a director of the company.
Sec 317. No Managing Director can be appointed for a term exceeding 5 years but the term may be renewed.
Sec 267. No person can be appointed as Managing Director who
i) is an undischarged insolvent
ii) has suspended payment to his creditors
iii) has been convicted by court of an offense involving moral turpitude

In practice, contractual terms of Managing Directors or High Level Executives are likely to be individually negotiated rather than standard terms applying to other groups of employees.

For employees who are also directors, the Companies Act 1956 prohibits certain benefits such as loans and lays down guidelines for remuneration and reimbursement of certain expenses.
10 How is a managing director or a high level executive hired?

As per Indian Law, the Managing Director of a company has been defined as a Director who has been entrusted with substantial powers of management, and who exercises his powers subject to superintendence, control and direction of the Company's Board of Directors. (Sec 2(26)-Companies Act, 1956). Sec 197A also states that there cannot be a Managing Director and a Manager in the same company where a Manager is defined as an individual who has the management of the whole or substantially the whole of the affairs of the company and he must be subject to superintendence, control and direction of the Company's Board of Directors. (Sec 2(24)-Companies Act, 1956). High level executives with designations such as President/Vice President may fall under this definition.
A Managing Director can be appointed in one of 5 ways:
i) Agreement with the company
ii) Resolution passed by the company in a general meeting
iii) Resolution passed by the Board of Directors
iv) Memorandum of Association
v) Articles of Association

A Manager may be appointed by the Board for such term or remuneration as it may think fit.
However, a person has to necessarily be a Director of the company to be a Managing Director and there can be more than one Managing Director. A manager need not be a director of the company.
Sec 317. No Managing Director can be appointed for a term exceeding 5 years but the term may be renewed.
Sec 267. No person can be appointed as Managing Director who
i) is an undischarged insolvent
ii) has suspended payment to his creditors
iii) has been convicted by court of an offense involving moral turpitude

In practice, contractual terms of Managing Directors or High Level Executives are likely to be individually negotiated rather than standard terms applying to other groups of employees.

For employees who are also directors, the Companies Act 1956 prohibits certain benefits such as loans and lays down guidelines for remuneration and reimbursement of certain expenses.
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