Directorship by Foreigners in Indian Companies: A Growing Trend

The globalization of the world economy has led to the increased participation of foreign entities in the Indian economy. In the corporate sector, foreign investment has been a significant contributor to the growth of Indian companies. With this growth, there has been a rise in the appointment of “Persons Resident outside India” as directors on the board of Indian companies. India has seen tremendous growth in the corporate sector over the years, and many foreign investors are now looking to invest in Indian companies. As a result, the government has made it easier for foreign nationals to become directors in Indian companies. In this article, we will discuss the requirements and process for Directorship by foreigners In Indian Companies.

Short Glimpse

The Companies Act, 2013, regulates the appointment of directors in Indian companies. The Act defines a director as “a person appointed to the Board of a company.” The Act also permits a person resident outside India to be appointed as a director on the board of an Indian company. However, certain conditions need to be fulfilled to make such an appointment.

Directorship by Foreigners in Indian Companies

A person resident outside India can be appointed as a director in an Indian company if the company has received the prior approval of the Reserve Bank of India (RBI). The RBI approves such appointments if it is satisfied that the appointment is in the interest of the Indian economy. The RBI’s approval is also required for the payment of remuneration to such directors.

Further, the appointment of a person resident outside India as a director in an Indian company is subject to certain conditions. These conditions include that the director must have a valid Business Visa or Employment Visa and must comply with the Foreign Exchange Management Act (FEMA) regulations. The director must also have a Permanent Account Number (PAN) card in India.

Eligibility to Become Directorship by Foreigners in Indian Companies

As per the Companies Act, 2013, a person who is not a resident of India can become a director in an Indian company. However, there are certain eligibility criteria that must be met. These include:

• The person must have a valid passport.
• The person must have a valid business visa.
• The person must not have been convicted of any crime in their home country or any other country.
• The person must not have been declared bankrupt.

Documents required for Foreign Nationals applying for a DIN

The following documents are necessary for a Foreign National applying for a DIN:

• Evidence of Identity: A copy of the foreign national’s passport is required as identification. Also, the Indian embassy in the country where the foreign national resides must notarize and apostille the necessary passport.
• Address Evidence: A photocopy of your driver’s licence, passport, or utility bills will suffice as proof of address (such as your phone or power bill). A bank statement from the last six months might also be used as proof. The address of the foreign applicant for the purpose of obtaining a DIN.

Furthermore, each of these address documents must be notarized and apostilled by the Indian embassy. It is the country in which the foreign national resides.

• Photographs of the applicant in passport format
• If the documents proving your identity and residence are not in Hindi or English. A professional translator must legally translate them into English. In the foreign country where the foreign national resides, a notary public. They must also have a working email account and a phone number.
• Verified email identity and an active mobile phone number in the foreign country where the foreign national resides
• A Declaration must be submitted stating that the applicant is not disqualified to serve as a director.
• A certifying body’s approved digital signature. Also, the same documents mentioned above for obtaining a DIN may be used to get digital signatures.
• Apostilling documents are not required in the following situations: If the applicant is a foreign national, all of the aforementioned documents must be apostille-ed. The Indian Embassy in the country of the applicant’s nationality. It is the Indian Embassy in the applicant’s home country.

• Apostilling Documents Is Not Required in the Following Situations: If the applicant is a person of Indian heritage with an OCI card. It is in India for whatever reason. There is no need for documents to be apostilled by the Indian Embassy of the country where the POI resides. All of his documents, if validated by any specialists in India, can be used to obtain the DIN.

• Apostilling Documents Is Not Required in the Following Situations: If the applicant is a non-resident Indian who has been away from India for more than 182 days. For whatever reason, it is in the prior fiscal year. In this instance, no documents would need to be apostille by the Embassy in the foreign nation where the NRI resides.
  If an NRI is visiting India during the creation of a firm and gets appointed to a director position. It is in an Indian corporation, and all of his documentation can be verified by Indian specialists.

Process for Appointment of Directorship by Foreigners in Indian Companies

The process for the appointment of a foreign national as a director in an Indian company is the same as that for an Indian national. The company must follow the following steps:

• Obtain a Digital Signature Certificate (DSC) for the proposed director.
• Obtain Director Identification Number (DIN) for the proposed director.
• Prepare and file the necessary documents, including the application for DIN, with the Registrar of Companies (ROC).
• The ROC will then approve the application and issue the DIN.
• The company can then appoint the foreign national as a director.

Important consideration while appointing Directorship by Foreigners In Indian Companies

It is essential for Indian companies to consider the advantages and disadvantages of appointing a person resident outside India as a director. On the one hand, such a director can bring in diverse experiences and expertise to the board. On the other hand, the cultural and language differences can sometimes create communication challenges and affect the effectiveness of the board.

Indian companies must also ensure that they comply with the regulations governing the appointment of directors. Failure to comply with these regulations can lead to penalties and legal repercussions.

Restrictions on Directorship by Foreigners in Indian Companies

While foreign nationals can become directors in Indian companies, there are certain restrictions on their directorship. These include:

• The foreign national cannot hold more than one directorship in an Indian company unless they get approval from the Reserve Bank of India (RBI).
• The foreign national cannot hold any shares in the Indian company unless they get approval from the RBI.
• The foreign national cannot act as a signatory to any bank account of the Indian company unless they get approval from the RBI.

Takeaway

In conclusion, the appointment of person’s resident outside India as directors on the board of Indian companies is a positive step towards globalization and the growth of the Indian economy. However, such appointments must be made in compliance with the relevant regulations and after due consideration of the advantages and disadvantages. The appointment of a director should always be in the best interest of the company and its stakeholders.

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