The company's law in India does not prevent foreign nationals from becoming directors in Indian companies. A foreigner or a non-resident Indian can become an executive or a non-executive or independent director of Indian public or private companies. According to the provision under the Indian Companies Act, 2013, a Director is appointed to the Board of a company. They are jointly recognized as the Board of Directors (BOD) of a company under Section 2 (10) of the Companies Act, 2013. The Board of Directors supervises the management activities of the company and also protects the long-term interests of the shareholders of the company.
Following are the pertinent laws related to a foreign national as a director in an Indian company:
📌 Appointment of directors under Companies Act, 2013
Under Indian Companies Act, 2013, six types of Directors are employed in a company. These are independent directors, women directors, additional directors, small shareholders directors, and alternative and nominee directors. The Act does not restrict a foreign national from being appointed as any of the above-stated directors in Indian Companies by following the Companies Act, 2013 along with the Companies Rules, 2014 which deals with appointment and qualifications of directors.
Following are the conditions that are to be satisfied by an individual including a foreign national to be a Director of a company under the Act :
📌 Every individual including a foreign national shall be provided with a Director Identification Number (DIN) before appointing as a director
📌 Every person including a foreign national to be employed as a Director shall give his DIN and shall declare that he is not disqualified from becoming a Director under this Act
📌 The individual including a foreign national appointed as a Director shall not act as a Director unless he offers his written consent to act as director in Form DIR-2. This consent must be filed with the Registrar within 30 days of his appointment.
📌 Application and Distribution of Director Identification Number (DIN)
📌 An applicant including a foreign national shall create an application for getting DIN in electronic Form DIR-3 to the Central Government along with prescribed fees of Rs. 500 as given in Companies Rules, 2014. The Central Government will offer an electronic system to ease the submission of the application for giving a Director Identification Number through the portal on the Ministry of Corporate Affairs website.
📌 The Form DIR-3 must be downloaded from the portal. It has to be filled and signed by the applicant using his/her own Digital Signature Certificate and has to be submitted electronically.
Checklist: Documents to be collected by OZGiAN helpdesk:
- Proof of identity
- Photograph
- Copy of Resolution about the proposal for appointing a Director including Foreign National/ NRI
- Evidence of residence
- If a foreign national is applying for DIN to become a director in an Indian company, then the details of a valid passport should be filled in Form DIR-3 and a certified copy of the same should be produced with the DIN application.
- All supporting documents with photograph should be certified by the Indian Embassy or a notary in the home country of the applicant or by the CEO or Managing Director or Company Secretary of the company incorporated in India, in which the applicant is a director.
- The DIN so acquired by the applicant shall be applicable till the lifetime of the applicant.
📌 Independent Director Position -
An independent director of a company denotes such a director who is not a promoter nor associated with the promoter of the company. He should not have any financial relationship related to any individual having a financial relationship with the company, whether it is a holding, subsidiary, or associate company. Neither he nor his relative holds chief managerial personnel or any employee in the company.
A foreign national can be an independent Director of a company if he has skills, knowledge, and experience in one or more fields of finance, management, law, marketing, sales, research, administration, technical operations, corporate governance, or other disciplines connected with the company's business.
📌 Managing Director or Whole-Time Director -
A foreign national who wants to become a full-time or managing director should be a resident of India who has been living in India constantly not less than twelve months, immediately before the date of his appointment. He should not be less than 21 years of age and not more than 70 years of age.
Foreign National as a Director according to Foreign Exchange Management Act (FEMA), 1999 -
Under the Foreign Exchange Management Act (FEMA), 1999 there are no restrictions for foreign nationals to become directors in Indian companies. They enjoy the same privileges and responsibilities as any other director. He is entitled to remuneration, sitting fees, travel expenses, and commission just like any other director. If you require consultation or general advisory on FDI/Equity allotments or related to appointment of Foreign National as director in company then please email to: ask@fema.in
A foreign national as a director in an Indian company can have and retain a foreign currency account with a bank outside India and obtain or take the whole salary payable to him for his services. A foreign national, who wants to become a director in an Indian company must retain a legitimate employment visa.
📌 Foreign National as a Director under Income Tax Act, 1961 -
Any income earned in India subjects to Income Tax. In the same way, where a foreign national earns as a director of an Indian company is subjected to income tax under Income Tax, 1961. The necessary TDS shall be deducted from their remuneration or commission under the provisions of Income Tax Act.
📌 Process for appointment of Foreign National as Director in Indian Company -
🕹️ Step 1 – Foreign National / NRI are required to get Digital Signatures. OZG-RA will get you digital signature in shortest possible time without any hassle.
🕹️ Step 2 - Then it is needed to acquire Director Identification Number (DIN) in Form DIR- 3 in which details of a valid passport must be filled and a certified copy of same shall be attached. All supporting documents with photograph must be certified by the Indian Embassy or a notary in the home country of the applicant or by the Managing Director/Company Secretary/CEO of the company registered in India, in which applicant is a director.
If a foreign director has a valid multiple entry Indian visa or Overseas Citizen of India card or Person of Indian Origin card, then the attestation can also be done by Public Notary/Gazetted Officer in India or a practicing company secretary/chartered accountant/cost accountant
Checklist - Documents to be collected by OZGiAN helpdesk:
🔖 Passport Size Photograph
🔖 ID Proof (Copy of Passport or, National ID where he is a National and that attested by,
🔖 Consulate / Indian Embassy / High Commission / Person of Indian Origin (PIO)/ Apostille or
🔖 A foreign nation of Indian Origin can file POI allotted by Government of India
🔖 Copy of Overseas Citizen of India (OCI) card issued by GOI)
🔖 Address Proof (Copy of Passport, Other National ID attested by Consulate / Indian Embassy / High Commission /Apostille or
🔖 Bank account statement in country of residence, duly attested by High Commission / Indian Embassy / Consulate / Apostille in the country where applicant is placed or
🔖 Person of Indian Origin (PIO) issued by Government of India or
🔖 NRE bank account statement or
🔖 Overseas Citizen of India (OCI) card issued by GOI)
🔖 The Form DIR-3 must be digitally verified by:
A company secretary (in whole-time practice) / a chartered accountant (in whole-time practice) or a cost accountant in practice; or A company secretary in full-time employment with the company or managing director or director of the company in which the applicant is to be appointed as director.
🕹️ Step 3 - Now as DIN is obtained, the company will file Form DIR-12 for the appointment of Director along with following documents:
- DIR-2 (Consent to operate as Director of the Company)
- DIR-8 (Intimation by Director regarding his interest in other entities and Disqualification under section 164 of the Companies Act, 2013).
- Letter of Appointment form the company
- Resolution passed by the Company about his/her appointment
- Passport is compulsory for foreign nationals. Foreign nationals shall select the nationality as mentioned in the passport.
- All the forms must be filed under the Companies Act are filed on MCA website through the digital signature.
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