Law relating to Contract with Managing Director


  • A Managing Director can be appointed merely by passing a resolution; it is not mandatory to make an agreement with the MD in case of a private limited company.
  • As per Section 190 (4) of the Act, a copy of the contract with respect to the appointment of MD need not be kept at the registered office of the company.
  • The Managing Director may work in a dual capacity, as the Director as well as an employee.
  • A person, who joins as an employee and is eventually elevated to the position of a director, may continue as an employee after completing his term as a director. His remuneration and benefits are revised while he serves his term as a
  • The term as Managing Director cannot exceed 5 years. The retirement age is 58 years. The two dates may not coincide. Hence, the Director will continue as employee until retirement.
  • Though the Companies Act, Rules thereunder and forms relating to appointment of Managing Director do not make it mandatory to enter into contract with the Managing Director, the instruction kit for filing form No. DIR 12 makes it mandatory to attach Appointment letter of Managing Director to the said form.
  • Hence, the safest way is to issue a contract letter to the MD and mention clearly that he will continue as employee as per original contract agreement after completing his term as MD; his salary and benefits can be superseded.