Information on Foreign Director in Indian Company, Types of Directors under Companies Act, 2013, and Foreign Company Incorporation in India

Introduction

In this article information on Foreign Company Incorporation in India, Foreign Director in Indian Company, Types of Directors under Companies Act, 2013, and Director under Companies Act, 2013 is mentioned. The Companies Act, 2013 governs the formation of all businesses in India. The Act allows an Indian business to be formed in India with a Foreign Director. The Company is managed by the Board of Directors.

A company’s board of directors might include both Indian natives and international nationals. A Foreign Company Incorporation in India, must have at least one director who is a citizen of India. An Indian Company can appoint a foreign national as an executive or independent director.

Director under Companies Act, 2013

A company’s board of directors appoints its directors according to the Companies Act, 2013. The Board of Directors safeguards the interests of the shareholders as a guardian. They play a critical role in developing company policies and managing the organization’s resources. The Board of Directors makes hiring and firing decisions for senior executives in the organization, such as the CEO (Chief Executive Officer). They also determine employee compensation and play a key part in determining the company’s objectives. Below are the types of directors under the Companies Act, 2013:

Foreign nationals or NRIs can be appointed to any of the above-mentioned positions as Directors under the Companies Act, 2013.

Eligibility Criteria for Foreign Director in Indian Company

Although the Act permits a foreign national to serve as a director of an Indian firm, the individual must meet the following requirements in order to occupy the post.

• DSC (Digital Signature Certificate)

The foreign individual who is to be appointed as a director of an Indian firm must have a class 3 Digital Signature Certificate (DSC). The forms must be submitted online through the MCA portal by the DSC. To get the DIN, the DSC must be added to the SPICe+ forms.

To receive a DSC, you’ll need the following documents:

1. Passport-size photos

2. 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.

3. A copy of a valid passport

The documents’ copies must be notarized and apostilled by a competent notary public and an authorized authority from the foreign nationals home country, respectively.

• Requirement of Whole Time Director or Managing Director

Foreign nationals who want to become managing directors or full-time directors in Indian firms must 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.

They should be no younger than 21 years old and no older than 70 years old, if in any case the director is appointed above the given age limit then a special resolution needs to be passed and other formalities if any laid by the government needs to be fulfill. Another requirement to being a director of a company is that he/she should not be insolvent or have been convicted of a crime and sentenced to more than six months in prison.

• DIN (Director Identification Number)

At the time of the company’s incorporation, anyone who wishes to serve as a director must receive a Director Identification Number (DIN). Before being appointed as a director in an Indian firm, a foreign national must obtain a DIN. The foreign national can obtain a DIN by completing form DIR-3 and submitting it to the Ministry of Corporate Affairs (MCA) or by completing the SPICe+ form.

When applying for a DIN, the foreign national must state that he or she is not barred from becoming a director under the Act. Unless approval is provided to act as a director in form DIR-2, the foreign national cannot act as a director upon his or her appointment. Within 30 days of his or her appointment, the foreign national must file a written approval with the Registrar of Companies.

• Income of a Foreign Director is Taxable

The Income Tax Act of 1961 makes foreign national earnings as a director of an Indian company taxable. According to the rules of the Income Tax Act, the applicable TDS would be deducted from their commission or salary.

A foreign national who is a director in an Indian firm must obtain a PAN card if he or she has a financial transaction of Rs.2,50,000 or more in a financial year, according to the Income Tax Act.

Though foreign directors are not prohibited from serving on an Indian board of directors, they must abide by the regulations of the Companies Act, 2013, the Income Tax Act, 1961, and the Foreign Exchange Management Act, 1999.

• Requirement for an Independent Director

Foreign nationals can be appointed as independent directors if they have the necessary skill, experience, knowledge, and qualifications in one or more of the following areas: law, marketing, finance, sales, research, and administration.

Compliance with the FEMA For a Director from another country:

Foreign nationals who are appointed as directors in Indian companies are entitled to the same compensation, commission, and sitting fees as Indian directors. As a result, they must adhere to the terms of the Foreign Exchange Management Act of 1999.

Foreign citizens who want to work in India as a director should have a valid work visa. They are allowed to open and keep a foreign currency account with a bank outside of India. They have the option of remitting or receiving their entire compensation for their services as directors in an Indian firm.

When Indian companies appoint overseas directors, they must submit an application to the approved dealers for remittance of their salaries, together with an undertaking certificate and a declaration addressing income tax payment.

Points to keep in mind for Foreign Company Incorporation in India

• A Non-Resident Director of an Indian Company can open a Foreign Currency Account with a bank based outside of India.

• He or she is required to attend at least one Board meeting, either in person or via video conference.

• At least one Indian Resident Director is required.

• The Income-tax Act allows a Non-Resident to claim a tax deduction.

• A Non-Resident is entitled to the company’s compensation, sitting fees, and travel expenses.

Process for Foreign Company Incorporation by Non-Resident Indian (NRI)

According to the Companies Act of 2013, the following procedure must be followed for the registration of a company by a non-resident director:

Incorporation by a Non-Resident Director – According to the Companies Act, 2013, there is no restriction on the incorporation of a company by a non-resident director as long as one of the directors is an Indian. The Non-Indian Director can serve on both the Executive and Non-Executive Committees.

Every applicant, including non-residents, will be assigned a DIN at the time of company incorporation. DIN applications must be submitted to the Central Government in electronic form DIR-3.

Conclusion

Inviting foreign nationals to participate in business initiatives and allowing them to take prominent positions in the office would undoubtedly bring up a slew of new opportunities for Indian businesses. The fact that Indian legislation has dutifully codified the appropriate requirements about the nomination of foreign directors in Indian company’s is a welcome development, paving the door for several significant international collaborations.