Balancing a Job and Your Own Startup: Can You Legally Run a Pvt. Ltd Company While Employed?

While working as an employee for one employer, can we work for our own company (Pvt. Ltd)? I mean, I want to establish a Product-Based Software Development Company and make it run smoothly while working in another Software Development Company. If so, are there any legal issues?

Thank you.

It depends on your employment contract with your current organization, which would be clearly mentioned in your appointment letter or in your company's Code of Conduct (COC).

Regards,
Priya

Thank you, Priya, for your quick response. There is no contract written between us. Also, I did not receive any offer letter from them, and I did not sign any employment-related documents. Our company is small and is not a private/public limited company in India. For your information, I am currently working for an MNC company (Client) listed in the World's Top 10 as a Vendor through our employer. Given this situation, can I proceed? I am unaware of the contracts between our employer (supplier) and the client, as I did not sign any documents when I moved to the client's location.

You must have settled down in your own company as a director. Though your thread is very old, I would like to respond so that this discussion may bring some value addition to our knowledge.

Implied Conditions in Employment

Even though there is no written contract between you and your employer, no appointment letter is issued to you by your employer, or there is no specific clause in the appointment letter, certain conditions are implied on your appointment. Accordingly, when you accept any employment, you are supposed to perform your duty wholeheartedly. If you involve yourself in other activities outside of your employment, it definitely affects your employment. Therefore, the employer can object to such activities outside of your employment. If there is any conflict of interest due to such activities, the employer can even take appropriate legal steps against you.

I invite other members to discuss this issue.

Transitioning from Entrepreneur to Employee

I have a similar situation. I am a tech entrepreneur who has registered a private limited company, but things are not going well financially. I have started job searching and got selected in an interview with one of the leading IT MNCs. Now, to join this MNC, should I resign from the directorship to become an employee of this company?

My own company has two directors. Can I keep it as it is (without filings with MCA), or should I file a resignation with intimation to the MCA? I plan not to close my startup, which is currently not doing well but may do well in the future. I also do not want to engage in any illegal activities towards my new employer (MNC IT Company).

I have read many articles that say you can work at another company while being a director of another company at the same time. However, in my case, I am the founder and first director, not an independent or non-executive director. In my company, there are only two directors.

Can a Company Director Be an Employee of Another Company?

Definition of an Employee

An employee is an individual who is hired by an employer to perform a specific job. The employee is hired by the employer after an application and interview process, resulting in their selection when the employer finds them to be the most qualified applicant for the job.

The Companies Act, 2013, was introduced to bring forth changes in company law to match current business trends. There is no provision that expressly mentions that a director can be an employee of another company, nor does it prohibit the same. The director is in the driver's seat for the company, responsible for its existence and future, which depends on the director's intellect and ability to predict situations.

In short, if one is an executive director, it is quite difficult to also be an employee for obvious reasons, as it could be challenging and push human limits and abilities. It is easier to become an employee or a director in another company or organization when you are in the non-executive part of directorship.