Transitioning Employees to a Limited Company: Do We Need Termination Letters First?

Transitioning Employees to a Limited Company

I am working in a manufacturing company, and our company is going to become limited from 1st April 2012. My doubt is, if we want to transition employees from the previous company to the limited company, do we have to provide them with a termination letter first, followed by an appointment letter on the letterhead of the limited company? I would like to inquire if this procedure is acceptable or if there is another recommended process. Additionally, I need a sample of a termination letter for the same. This matter is very urgent.

Thank you and regards,
Dimple Patkar
Sr. Executive HR

Dear Senior, please guide me. I want your guidance regarding the termination and new appointment letter to the existing employee when the company is going to become limited.

Since you are a manufacturing company, you fall within the purview of the Industrial Disputes Act 1947. The Industrial Disputes Act envisages terminations under the following situations:

1. If there is surplus staff under Sec. 2(00).
2. If there is a transfer of undertaking by one employer to another employer and if the new employer is not willing to take the workmen of the previous employer.
3. If you are going to close the company under Sec. 25-FF or Sec. 25-O.

Since none of the three situations exist, as the same management will run the new company and continue the same activity, and there is a mere change in the corporate structure, in my view, there is no need to terminate the services of the existing workmen under the old company. It will suffice if you can issue them letters stating that they continue to be the employees of the new company and that their seniority and benefits will remain the same. On the other hand, if you resort to termination, it might lead to many questions as to what kind of termination and which provision of law it was affected. However, this is my view only, and you can hear other opinions.

Regards,
B. Saikumar
HR & Labour Law Advisor
Mumbai
[Phone Number Removed For Privacy Reasons]

Thank you, sir, for your advice. Thank you very much. As the same management will run the new company, but as a limited company, there will be no other changes.

Thanks and regards,
Dimple Patkar
Sr. Executive HR

Dear Sir, presently, we are a proprietorship company, and after 1st April 2012, our company will become limited, meaning more than 5 directors. I am a bit confused about the re-appointment process for them and the procedures for transferring all the employees to the limited company. What about their PF facility, etc.? The company is situated in the same location. Can you please help me?

Thanks and regards,
Dimple Patkar
Sr. Executive HR