Introduction Foreign Directors

In this write-up, I am sharing with you all my understanding about the appointment of Foreign Directors to a Board. As a Budding Professional, we generally think that it could be more cautious to appoint a Foreign Director in a Company but there is no such additional requirement under FEMA. A foreigner or a non-resident Indian can become an executive or a non-executive/independent director of Indian companies whether public or private.

The only Basic requirement is to Get a valid DSC (Digital Signature Certificate) and DIN (Director Identification Number), a valid Indian employment visa would be required for appointment as a managing director or a whole-time director.

According to the Companies Act, 2013, every company incorporated in India must have at least one director who is a resident in India. For certain categories of companies, the requirement is even higher, and they must have at least two resident directors.

It is essential to note that while the Act outlines the requirement for resident directors, there are no specific provisions for “foreign directors.” The law focuses on the residential status of directors rather than their nationality.

Procedure to be followed for Appointment of Foreign Directors

Appointing foreign directors in an Indian company involves following specific procedures and complying with legal requirements. Here’s a general outline of the steps you may need to take:

1. Verify Eligibility: Ensure that the foreign individual meets all the eligibility criteria as specified in the Companies Act, 2013, and any other relevant regulations. For example, if the company needs to appoint Independent Directors, the person must meet the criteria outlined in the Act.
2. Obtain Director Identification Number (DIN): The foreign individual must obtain a Director Identification Number (DIN) if they do not have one already. DIN is a unique number issued by the Ministry of Corporate Affairs (MCA) that is required for anyone serving as a director in an Indian company.
3. Apply for Digital Signature Certificate (DSC): A DSC is required to sign electronic documents filed with the Registrar of Companies (ROC). The foreign director should obtain a DSC from a government-approved certifying agency in their home country.
4. Approval from the Board of Directors: The Board of Directors of the Indian company should approve the appointment of foreign directors. This approval may be obtained at a board meeting or through a resolution passed by circulation, as per the company’s Articles of Association.
5. Obtain Consent: The foreign individual must give written consent to act as a director of the Indian company. This consent should be provided in the prescribed format.
6. Check Company’s Articles of Association: Ensure that the company’s Articles of Association do not contain any restrictions or provisions that prevent the appointment of foreign directors. If there are any such restrictions, appropriate amendments may be required.
7. Apply for Directorship: File the necessary forms and documents with the ROC to appoint the foreign individual as a director. The forms and documents required will depend on the type of company and the director’s role (e.g., Independent Director, Resident Director, etc.).
8. Compliance with FEMA: Compliance with the Foreign Exchange Management Act (FEMA) is essential when appointing foreign directors. The company must adhere to the rules and regulations concerning foreign investment and remittances.
9. Tax and Legal Considerations: Ensure that the appointment of a foreign director complies with tax regulations and any other legal requirements both in India and the director’s home country.
10. Board Meetings and Attendance: Once appointed, the foreign director may participate in board meetings either in person or through video conferencing, as permitted by the Companies Act.

If a foreign individual meets the qualifications and criteria for an Independent Director, they can be appointed as an Independent Director in an Indian company. However, they must ensure compliance with the residency requirements to fulfill the role of a Resident Director.

Once we are done with basic requirements Conduct Board Meeting by service Proper Notice and Pass the resolution for Appointment of Director with requisite majority.

Form DIR-12 is to be filed with the Ministry of Corporate Affairs, following documents required for the same:

Please note the below: –

1. All documents mentioned above should be notarized before the Notary (Public) of the country of origin and be duly Apostilled.

2. All the documents mentioned for the Directors will be required in two sets, duly notarized and apostilled as mentioned.

3. All documents to be in English, if not then translation will be required which also will be duly notarized and apostilled.

4. Just like Indian nation Director and Foreign director shall be appointed as additional director in Board Meeting.

Procedure for Resignation of Foreign Directors

• As Per Section 168 of Companies act 2013, a director may resign from his office by issuing a notice in writing to the company.
• On condition that a director may also forward a copy of his resignation with detailed reasons for the resignation to the Registrar within 30 days of resignation in prescribed manner
• A director can resign after giving a written notice to the company and on receipt of the notice of resignation next step would be to inform the Registrar of Companies after that company will propose all the facts and reports in the following General Meeting.

• According to Rule 15, the company shall inform the Registrar in Form DIR- 12 within 30 days from the date of receipt of notice of resignation from a director. Company must file DIR-12 within 30 days of receipt of notice of resignation by the director.

ATTACHMENTS FOR DIR-12 OF RESIGNATION OF FOREIGN DIRECTORS

• Copy of Board Resolution
• Resignation Letter
• Acknowledgment of Acceptance of Resignation Letter.

INTIMATION OF RESIGNATION TO ROC BY FOREIGN DIRECTORS HIMSELF

• According to Rule 16, where a director resigns from his office, within 30 days from the date of resignation, he shall forward to the Registrar a copy of his resignation with reasons for the resignation in Form DIR-11. This should accompany with the fee as recommended in the Companies Rules, 2014 (Registration Offices and Fees).

• In case a company has already filed Form DIR-12 with the Registrar of Companies, a foreign director of such company resigning from his office may authorize in writing a practicing professional (CA, CS, CWA) or any other resident director of the company to sign Form DIR-11. Such e-Form shall be filed on his behalf intimating the reasons for the resignation (however, as on date this provision is not mandatory).

• As Section 168(2), Companies Act, 2013, the resignation of a director shall take effect from the date on which the “Notice is received” by the company. Under the provisions of section 168, Companies act 2013, no right has been offered to any managerial person to reject the resignation given by Directors.

WHAT IF THE COMPANY NEITHER EXCEPT THE RESIGNATION NOR INTIMATES TO ROC ABOUT FOREIGN DIRECTORS

If a Director who has submitted his resignation (for example on 31st July 2020) from the post of director to the board of directors and the board of directors neither approved the resignation nor it filed the form necessary to be filled by the company to the Registrar of companies, then according to sec 168(2), Companies act, 2013 the director who has resigned would discontinue to be a director with effect from 31st July 2020.