Can NRIs Become Director Of An Indian Company

Yes, the Companies Act 2013 permits Non-Resident Indians (NRIs) to serve as directors of an Indian company. However, the entire process of an NRI becoming a director requires the concerned individuals to comply with certain legal requirements, documentation, and residency obligations. 

In this blog post, we will discuss in detail how a non-resident indian (NRI) can become a director of an Indian company, including the advantages of becoming one, the step-by-step process, the documents required, FEMA/RBI compliance, the roles and responsibilities of an NRI director, and so on. 

Who Is Considered An NRI Under Indian Law?

A non-resident Indian is an Indian citizen who resides outside India for employment, business, or other purposes for an uncertain duration, or for 182 days or more in a financial year. Under Indian company laws, an NRI is treated as a foreign national for compliance purposes; however, they are provided certain relaxations as compared to other foreign citizens. 

Who Is A Director Under The Companies Act, 2013?

The Companies Act 2013 defines a director as a person appointed to the board of a company. According to Section 149 of the Companies Act 2013, every company shall have a board of directors. Futhermore

• A minimum of three directors is required for a public company. 
• A minimum of two directors is required for a private company. 

Furthermore, the Companies Act states that only individuals may be appointed as directors of a company, and that no artificial person may be appointed as a director. 

The provision of the Act does not impose any restriction on the appointment of non-residents as directors of the company. 

As per the Companies Act, the following are the designations of the directors. 

• Managing Director. 
• Whole-tome director. 
• Women Director. 
• Independent Director.
• Small shareholders' Director. 
• Additional Director 
• Alternative Director 
• Nominee Director. 

How Many Directors Can Be NRIs In An Indian Company?

There are certain cases where NRIs want to incorporate a company in indian with only foreign directors. But under section 149(3) of the Companies Act, every company must have at least one Indian citizen as a director on its board. 

The board cannot entirely contain foreign or NRI directors. 

Benefits Of Having An NRI Or Foreign Director

Having an NRI on your board is about more than just legal formalities; it brings strategic advantages to the table. Such as:

Global Networking: NRIs often bring international contacts, and some may be potential foreign investors for the firm. 

Global Best Practices: NRIs often introduce international standards of technology and governance to the Indian company they serve as directors of. Doing so somehow levels up the company's entire operations. 

International Trade: Having an NRI director on the board tends to enhance the company's international trade experience. This is so because NRIs usually leverage their global network for market entry, facilitate foreign investment, and help Indian companies access foreign markets more easily. 

Criteria To Appoint an NRI As Director

Before an NRI joins an Indian company as a director, there are certain statutory requirements that he/she must fulfill. Such as

Digital Signature Certificate (DSC)

• Since most filing in India is electronic, NRIs need a DSC to sign digital documents. Furthermore, the DSC is needed to file online forms on the Ministry of Corporate Affairs (MCA) portal. 
• A DSC is usually a digital version of a handwritten signature or a stamped seal. A digital signature also solves the risk of tampering or impersonation in digital communications. 
• Every non-resident indian or a foreign entity that is appointed as a director at an Indian company needs to mandatorily have a Class 3 Digital Signature Certificate (DSC). 

Director Identification Number (DIN)

• A unique eight-digit identification number issued to individuals serving as directors of Indian companies. 
• Furthermore, every person proposed to be a director of the company must have a Director Identification Number (DIN) before the appointment. 
• NRIs can obtain a DIN by filing an application in Form DIR-3 with the Ministry of Corporate Affairs, or by applying for a DIN in the SPICe+ form. 

Declaration

Every NRI who is intended to be appointed as a director of the company mandatorily is required to submit a declaration to the company that he/she is not disqualified under section 164 of the Companies Act 2013. 

Written Consent To Register

Every NRI intended to be appointed as a director of an Indian company must submit a written consent to act as a director. 

Consent is given in Form DIR-2, and the same must be filed with the RoC within 30 days of the date of appointment. 

Eligibility Criteria To Appoint An NRI As Director 

Under Section 164 of the Companies Act 2013, a person is not eligible to be a director of a company if they meet any of the following conditions. 

• The individual is of an unsound mind, and the same has been declared by a competent court. 
• The individual is an indischarged insolvent. 
• The individuals who applied to the adjudicator as insolvent, and their applications are pending. 
• Any person who has been convicted of any offence and has been sentenced to imprisonment for not less than six months and a period of 5 years. 

Furthermore, for an NRI to serve as the director of an Indian company, they have to be between the age bracket of 21 and 70. 

Step-by-Step Process To Appoint An NRI Director

The following is the step-by-step process to appoint an NRI as the director of an Indian Company. 

Step 1: Get A Digital Signature Certificate (DSC). 

To get a DSC, NRIs are required to provide self-attested copies of their address proof and passport. Then have these documents notarised and apostilled in accordance with the laws of their country of residence. 

Step 2: Apply For A Digital Identification Number

Once the DSC is enabled, NRIs can apply for a DIN by filing DIR-3 (for existing companies) or by adding it to the SPICe+ form (for incorporation of a new company).

Step 3: Board Resolution & Consent

For NRIs to be appointed as the director of the company, the company is required to pass a Board Resolution. The NRI must file their written approval via DIR-2, which demonstrates the individual's intent to serve as a director. 

Step 4: Filing With ROC

Lastly, the company will file Form DIR-12 with the ROC within 30 days of the appointment. This officially puts NRI on record as the company's director in the government database. 

Documentation Checklist For NRIs 

Documentation is generally the phase where many get tripped up. Henceforth, we have kept it simple; the following is the document requirement for NRIs to be appointed as directors of the company. 

What Are An NRI Director's Roles & Responsibilities 

The legal rights and responsibilities of an NRI director are the same as those of a resident director. The following activities represent their work responsibilities. 

• Act in good faith to promote the company's objective. 
• Exercising reasonable care and independent judgment in the matters. 
• Attend board meetings without fail, whether in person or via video conferencing. 
• To prevent any conflict of interest in the future, disclose your interest in other companies or contractors. 

NRI Director Tax Implications in India

Any income earned by an NRI director in an Indian company throughout the financial year in the form of sitting fees or remuneration is not exempt from Indian income tax. Furthermore; 

• TDS (Tax Deducted At Source): Companies must deduct tax at source before making any payment to NRI directors. 
• GST: In certain cases, the director may apply the reverse charge mechanism to the service provider. 
• DTAA Benefits: NRIs can claim the benefits under the DTAA (Double Taxation Avoidance Agreement) between Indian and the NRI's country of residence to avoid paying taxes twice.

The Bottom Line

As an NRI, becoming a director of an Indian company is a great way to participate in India's economic growth while being connected to your roots. Definitely, the regulatory framework for an NRI to become a director of a company can feel complex at first, but with the right guidance and professional assistance, it's smooth sailing. 

When it comes to professional assistance in any NRI-related matters, Savetaxs is the name to trust. Our experts here don't just consult you to file forms; they also create a tailored strategic plan for NRIs on how to help with company registration from start to finish. Our tax experts furthermore consult on GST, Income Tax, and ROC compliance management. We also provide FEMA and RBI consultancy services to assist with fund transfer operations. 

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