Is it possible for a director of a company to be an employee of another company

Introduction

A director is a person who manages the affairs of the company; on the other hand, an employee is a person who is engaged in certain tasks assigned by the employer. The Companies Act, 2013 does not explicitly define and forbids a director of a company to become an employee of another company but there are certain consequences of doing the same. In this blog we will discuss which individual or person can serve as a director and employee of the company along with the roles and functions of the director and employee.

Definitions of director and an employee

A. Director: A person who is appointed by the company to carry out the statutory duties of the company, and he is in charge of managing the affairs of the company is called director. The director is defined under section 2 (34) of the Companies Act, 2013.

B. Employee: An employee is a person who has been engaged by an employer to do certain tasks. The applicant is selected by the company -following an application and interview procedure, and after the employer determines that the applicant is the best fit for the position.

What are the roles and functions of director?

A director of a company may play a variety of roles and functions, including:

• The management, supervision, and direction of the company are within the purview of the company director. The company’s policy must be executed and implemented according to the direction of directors.
• In order to accomplish the company’s goals and serve the interests of all of its members, a director focuses on the efficient administration of the company.
• A company is an artificial person whose director acts as an agent on the behalf of the company to execute the decisions of the company.
• If the director is recruited on a full-time basis, he or she acts as an employee of the company.
• A director serves as a trustee for the company’s assets, including its cash and property.

Roles and responsibility of the employees

An employee of a company plays numbers of roles and responsibilities, including:

• The employee is responsible for carrying out the work for which he/she is hired.
• An employee should avoid getting into trouble regarding any work assigned to him.
• He/she is liable to hide the confidential information of the company, they encounter during work.
• The employee is liable to follow all the rules of the company.

Can a director be an employee of another company?

Yes, it is possible. A person who is director of a company can also be an employee of another company. According to the Companies Act, 2013, there is no such provision that forbids the director to be employee of another company. The roles and responsibility of director and employee are very different but they are equal important too. If a person wishes to hold both the positions, he might face some consequences. The consequences are listed below:

1. Contract of employment- A director of a company can face legal consequences if the contract of employment specifically prohibits the director from working as an employee in another company or anywhere else.
2. Conflict of interest- There is a considerable chance that certain problems of the companies (company of the director and another company in which he is an employee) may overlap when two businesses operate in the same industry. This might result in many problems, including a possible conflict of interest or violation of confidential things or matters, among others.
3. Shortage of time- A person might not have enough time to perform well in both professions. He can completely focus on his work as an employee in another company by meeting deadlines and doing other work-related duties, or he can focus on the work of director of such as hiring, giving direction, and other activities. These can be very challenging.
4. Low efficiency- The director has a significant role in the company, from decision-making to managing the risks. There will be a compromise in quality of work if a person works as the director of one company and an employee in another company at the same time.

Conclusion

We will conclude by saying that there is no specific provision under the Companies Act, 2013 that forbids the director from being an employee of another company. If a director chooses to become an employee of another company, he can come across many conflicts such as legal consequences, shortage of time etc.