Crafting a Managing Director's Appointment Letter: What Terms Should Be Included?

just_neo_chetan
I want to offer my Managing Director an appointment letter with the terms and conditions for his tenure with the company. Any ideas on what terms should be included in the offer letter?
RatanC
Depends on the type of director. Broadly, it will be different for a paid Managing Director (MD) even with stakes (less than 5%) and an MD with a stake in the company more than 5%.
basheed
Importance of a Professional Agreement

A professional agreement is a must, not just a letter! It must include a non-compete agreement in the future too, especially if the Managing Director is not the owner, founder, or co-founder.

Regards,
Basheed
ngurjar
Agreed with Basheed... You will need a regular contract and not just an appointment letter. The letter is fine in its place, but this is a position with significant legal ramifications, and that is normally a subject of a legal contract.
eastculturalassociation
Dear Chetan,

Much would depend on the following.

Please start discussing these topics and prepare complete answers to the following:

1. Is he a shareholding Director on the Board? If so, arrange to fix his managerial remuneration/emoluments and appropriate formulae.

2. Is he an Executive directly involved in certain areas of operations such as production, HR, Finance, Special divisions, etc.? Then, define the areas of his responsibilities, assigned duties, and day-to-day tasks.

3. List the delegation of powers and responsibilities.

4. Review your Recruitment and promotion policies/rules, shortlist those applicable to him, consider his scale of pay, allowances, perks, benefits, etc.

5. Extract relevant points from the appointment letters of other directors that are common to all.

6. Directors are usually appointed for a specific tenure; therefore, finalize his tenure in consultation with your officials concerned/competent to.

7. List other general terms such as conduct and discipline rules, termination terms, etc.

8. Determine whether he needs to take an oath of office and secrecy.

9. Seek guidance from your Company Secretary to ensure compliance with the requirements of the Companies Act.

Once you have done the above, proceed to prepare and compile a draft offer/appointment letter. Have it reviewed and approved by an authorized authority before proceeding.

If you feel unsure, consult a competent legal advisor well-versed in company law matters for vetting. Remember to seek approval from your board as well. Pass a resolution and have it authenticated by your company Secretary for your records.

If you still need assistance, provide further details and specifics. If necessary, send an email to rajhs10@gmail.com with full details. I will do my best to assist you; a simple thanks would suffice, no fee is charged.

Best wishes,

Kumar, Bg.
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