How to appoint foreign Director?

The Companies Act 2013 welcomes foreign directors to become a director in a company that is located in India. Also, foreign nationals/foreign directors are allowed to become executive or non-executive/independent directors. Therefore, the process for appointing a foreign national is the same as that of appointing an Indian citizen in a company. However, the process involved in appointing a foreign director includes some additional conditions as well. Let us move ahead with the topic of what all are necessary compliances to appoint a foreign director in a company.

As per Section 1 of Schedule V of the Companies Act 2013, anybody including an Indian citizen who has lived in India for a cumulative duration of fewer than 182 days in the preceding calendar year will be consigned as a “foreign national”.

Criteria to be a Foreign Director

1. Foreign individual must have a class 3 Digital Signature Certificate (DSC)

You can visit the MCA Portal to contact the agency that provides DSC. There are majorly 3 documents asked by an individual in order to apply for a DSC. The documents are:-

• Passport-size photo
• Valid address documents, such as bank statements, driver’s licenses, phone bills, and electricity bills, that are less than two months old at the time of application.
• A copy of a valid passport

Note:- The three documents asked above must be notarized and apostilled by a competent notary public and an authorized authority from the foreign nationals home country, respectively.

2. Requirement of Whole Time Director or Managing Director

For becoming a foreign director, it is necessary to meet the criteria of being a resident of India, which means they must have lived in India for at least 12 months prior to their appointment as a director. Also, the individual must not be younger than 21 and not older than 70 years and where the limit gets exceeded, then a special resolution (SR) needs to be passed. Last yet the most important point to note is that he/she should not be insolvent or have been convicted of a crime and sentenced to more than six months in prison.

3. Next is obtaining the Director Identification Number (DIN)

DIN is the most important compliance that must be followed to be a director in a company as it’s the identification number of the directors existing in a company. So, before desiring to become a director in an Indian company, a foreign national must obtain a DIN.

4. Requirement for an Independent Director

Foreign nationals can be appointed as independent director if the person is holding necessary skills, good experience, high knowledge and qualification in one or more of the following areas:- law, marketing, finance, sales, research and administration.

Let us proceed further and know the steps involves in appoint a foreign director in an Indian Company.

Steps involved in appointment of a foreign director

Here are the steps mentioned below that will help you to appoint a foreign director in a company. The steps are as follows-

Step 1 : Apply for Digital Signature Certificate (DSC)

It is the first step that must be complied with for becoming a director of a company. For applying for DSC, you may visit the MCA Portal and get the contact no. of the agency providing DSC.

Step 2 : Obtain Director Identification Number (DIN)

The next compliance is obtaining the director identification number. By filling out form DIR 3, a request is sent to the Registrar of Companies for DIN. The government charges INR 500 for DIN registration. The form must be signed by the existing director of the Indian company wherein he/she will be appointed as a Director.

Step 3: Conduct a Board Meeting

The board meeting shall be conducted by the Board of Directors (BOD) of the Company as the BOD is the responsible authority that makes decisions on behalf of the firm. The board will convene a meeting after receiving a letter from the NRI Director requesting to serve as director. To add an NRI as a director, the board must approve a board resolution at its meeting. This paperwork needs to be stamped by the business and signed by the board.

Step 4 : File form DIR-12

Filing of form DIR 12 is necessary for appointment of a foreign director. DIR- 12 is the prescribed form that is to be filed including the company information, date of appointment of foreign director, designation, first director declaration, as well as the declaration from the newly appointed director in form DIR-2.

The four-step guide will allow you to know how the appointment of a foreign director is done and what all steps and criteria is included. So, this was how appointment of a foreign director can be done.

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