In my view.......Companies Act is silent about the residential status of the Director...No where it is mentioned that NRI is ineligible for being appointed as Director. Hence a NRI can become a director. Regarding tax exemptions We never came across of specific exemtions for firms that managed by NRIs.
There is no restriction on appointment of NRI as director of the Indian company.However in case of appointment of NRI as MD you must comply some procedural requirements under Companies Act, 1956.
DCA Circular dated 16-2-1995 clarifies that there can not be any restriction for incorporation of a company whether all the subscriber to the MOA/AOA/ proposed directors are residing abroad, being either foreign nationals, or NRI subject to the approval of RBI, where necessary.
Section 286 of the Companies Act provides that notice of every meeting of the Board of Directors of a Company must be given in writing to every director for the time being in India, and at the usual address in India to every other director. However,telephonic invitation/oral can not amount to the notice within the meaning of Section 286.( R.Khemka Vs Deccan Enterprises (P) Ltd. 1998.
In view of the above section it is clear that if an NRI appointed as board member it is difficult to call board meeting and other board proceedings, since he is residing abroad.Though there is no express prohibition to appoint an NRI as Board member practically there are difficulties to appoint an NRI as Board member by complying with Section 286 of The Companies Act.
However, The Institute of Company Secretaries of India (ICSI) has, through its Secretarial Standard-1(SS-1),Suggested service of notice by e-mail or any other electronic mode also. However, where a director has specified a particular mode the notice should be given by that mode only.
ONE OF MY CLIENT IS A AMERICAN CITIZEN BUT LIVING IN INDIA FROM LAST 3 YEARS . HE IS PRESENTLY DIRECTOR OF A PRIVATE LIMITED COMPANY OF WHICH I AM THE CA. HE NOW WANTS TO BE MD OF THE SAID PRIVATE LIMITED COMPANY. CAN YOU TELL ME: IF THERE ARE ANY RESTRICTIONS OR NORMAL PROVISIONS APPLY.