Can a Major Shareholder Work as an Employee? Exploring Salary vs. Consulting Fees

Can a Major Shareholder Be an Employee?

I need a suggestion for my query: Can a major shareholder of a company also be an employee? If so, should they be paid a salary with all benefits like other employees or as consulting fees? Please share any documents related to this query.

Dear Teenraj, I am unable to understand the context of your question. Being a major shareholder, one can become a director and thereby become the managing director of the company. A managing director is an employee of the company but not to the extent so as to be entitled to preferential payments. Thus, a managing director occupies the dual role of an employee as well as the director of the company. I think from the above answer, you can cull out the answers to your other queries. It would be better if you could go through section 2(54) of the Companies Act, 2013.

Clarification on Shareholder-Employee Roles

Please clarify whether the company is registered as per the Companies Act 2013. In general, it can be said that as a major shareholder, the person has certain roles and responsibilities. However, as an employee, the person is expected to act and behave like any other employee. The rules and regulations applicable to all employees would equally apply to the shareholder-employee.

As a major shareholder, the person will have a say in many of the major decisions of the company, and as an employee, he will have to implement them. In case the company is a registered one, then the provisions of the Companies Act will be applicable to the shareholder.

There is no issue if an employee can have shares of the company and even be the major shareholder of the company. The employee can continue to be an employee of the company with a salary until he leaves the job. Shareholding is nothing but an investment, so any individual can purchase these shares from the market, and many times the company also allots shares among its employees. An employee with major shares can be nominated as a Director, Managing Director, or Chairman of the company based on their shareholding. Your company secretary can provide more details on the matter, or a Chartered Accountant can explain everything in detail.

I hope this helps clarify the situation. Let me know if you need further assistance.