Incorporating a Company: Is It Okay to Issue Appointment Letters Now?

Hi, my company is currently in the process of incorporation. Can I issue the appointment letters to my employees?

Tasks Completed by Company Secretary

My company secretary (CS) has completed the following tasks:
- DIN Registration
- Company Registration

Thank you.

Issuing appointment letters to all employees is mandatory as per law. The appointment letter should be issued to the employee on the date of their joining. All employment terms and conditions shall be affixed with the letter of appointment. It's also recommended for HR to brief the content of the 'letter of appointment' while issuing it.

Warm regards,
Umesh Chaudhary
[Email Removed For Privacy Reasons]

I appreciate the comment of Mr. Umesh Choudhary and would like to add the following points:

- The person who signs the appointment order should be the authorized signatory.
- You have not mentioned your status/designation.
- However, obtaining approvals on the existing manpower from the Chairman and preparing a proper appointment order would be beneficial for both parties (employee and employer).

Regards,
S. Rao
Hyderabad
[Phone Number Removed For Privacy Reasons]

It appears that your company is yet to be incorporated and is in the process of incorporation. This means it has not yet come into existence legally. How can you issue appointment letters under its seal and stamp?

Regards,
B. Saikumar
Mumbai

I second the views of Mr. Saikumar. It would be wise if you could make some stop-gap arrangements for the individuals you need to hire, essentially until your company gets registered.

Regards,
Shailesh Parikh

[Phone Number Removed For Privacy Reasons]
Vadodara, Gujarat

Your statements are contradictory. You said your company is under incorporation. You also mentioned that your CS did the work of registration of the company. Additionally, you became a member of this forum under your company's name as Pvt. Ltd.

If your company is registered as a Pvt. Ltd. company, the incorporation certificate must have been issued to you. Therefore, you are officially and legally able to transact any business in your company's name, including appointing employees and issuing appointment letters to them.

If your company is not yet registered as a Pvt. Ltd. company, you need to have a stopgap arrangement as suggested by Sai Kumar ji and Shailesh ji. You need staff or experts to do some preparatory jobs before you start your business. Such staff or experts can be hired as professionals, and professional fees can be paid to them after incorporation.

Regards.

Just a quick addition: whether the company has been registered or is yet to be registered under the Registrar of Companies (ROC), if the organization has employed even a single employee, the appointment letter needs to be issued. The appointment letter is an agreement between the employee and the employer; therefore, it has no relevance whatsoever with the company's registration, office premises allotment, trade certificate, sales tax registration, EPF, or ESIC code allotment, etc.

Warm regards,
Umesh Chaudhary
[Email Removed For Privacy Reasons]

Mr. Keshav Korgaonkar rightly raised certain pertinent questions for clarification. If the company is to be incorporated and you need to engage someone to do various jobs relating to incorporation, etc., you can, as Keshavji suggested, engage them as independent professionals and consultants and pay them the professional fees.

Regards,
B. Saikumar
HR & Labour Law Advisor
Mumbai

Company name is registered (LLPIN/CIN/1A Ref No B72406226). According to my CS, some work is remaining.

Regards,
Tarsem Singh

No law prescribes that an appointment order should be issued. However, it is indirectly implied to have one due to many other implications under labor laws.

Regards, Varghese Mathew

I am sharing with you what Section 34 states in the Delhi Shops and Commercial Establishments Act:

Employer to Furnish Letters of Appointment to Employees

The employer shall furnish every employee with a letter of appointment. Such letters of appointment shall contain the following and such other particulars as may be prescribed, namely:
- The name of the employer,
- The name, if any, and the postal address of the establishment,
- The name, father's name, and the age of the employee,
- The hours of work,
- Date of appointment.

Similar provisions are mentioned in other states' Shops and Commercial Establishments Acts. Though I don't have a copy of the Indian Factories Act, 1948, I am sure the same would be written there, probably with some other terms or nomenclature.

Regards,
Umesh Chaudhary

[Email Removed For Privacy Reasons]

Issuing Appointment Letters During Incorporation

You must issue an appointment letter if the firm is to be incorporated; otherwise, you have to make some kind of agreement with the individuals under a proprietary concern.

You have mentioned that your CS has completed the Company Registration, indicating that your company is already incorporated. Therefore, there should not be any hesitation in issuing the Appointment Letters. Your CS may be waiting to address other formalities. Please provide clarification so that appropriate guidance can be given by the seniors.

As your company has just started the process and has not been incorporated, you can't use the company's name for any action or on any documents until all the fees are paid to the ROC and an Incorporation Certificate is issued by the ROC. Please understand that a company is a legal entity and will only come into existence when the ROC signs and delivers the Incorporation Certificate. Under no circumstances can you use the name of this company before it becomes a legal entity. In the meantime, employees can be recruited, but under a different account or firm's name or on a Proprietor Firm's letterhead.

Once the company is incorporated, the appointment letter can be issued, but the signatory should have the authority as per the Articles & Memorandum of Association, apart from fulfilling the minimum paid-up capital requirements to conduct the business. Another important point is that the appointment should be related to the business mentioned in the main clause of the Articles/Memorandum, as companies are legally authorized to engage in specific business activities.

Thanks.

Appointment letters should be issued as per the Shops & Establishment Act only, not as per the Companies Act.

Regards,
Srinivas B