Analysis of The Companies (Appointment and Qualification of Directors) Amendment Rules, 2022

The Ministry of Corporate Affairs (MCA) vide its notification dated June 01, 2022, has notified The Companies (Appointment and Qualification of Directors) Amendment Rules, 2022, and the said rules are applicable from immediate effect i.e. June 01, 2022.

The Amendments provides for the following

1. After the first proviso the following new proviso has been inserted in Rule 8 of The Companies (Appointment and Qualification of Directors) Rules, 2014:

"Provided further that in case the person seeking appointment is a national of a country which shares a land border with India, necessary security clearance from the Ministry of Home Affairs, Government of India shall also be attached along with the consent."

After the Insertion of the new proviso, the Rule 8 of The Companies (Appointment and Qualification of Directors) Rules, 2014 shall be read as under:

8. Consent to Act as Director

Every person who has been appointed to hold the office of a director shall on or before the appointment furnish to the company a consent in writing to act as such in Form DIR-2:

Provided that the company shall, within thirty days of the appointment of a director, file such consent with the Registrar in Form DIR-12 along with the fee as provided in the Companies (Registration Offices and Fees) Rules, 2014.

Provided further that in case the person seeking appointment is a national of a country which shares a land border with India, necessary security clearance from the Ministry of Home Affairs, Government of India shall also be attached along with the consent.

Effect of the above amendments

If any person who is a national of a country that shares a land border with India (i.e. China, Bangladesh, Pakistan, Bhutan, Nepal, Myanmar, and Afghanistan), seeking an appointment in any Indian Company, shall on or before his/her appointment shall obtain and attach necessary security clearance from the Ministry of Home Affairs, Government of India along with his/her consent in writing to act as such in Form DIR-2.

2. The following proviso has been inserted in Rule 10(1) of The Companies (Appointment and Qualification of Directors) Rules, 2014:

"Provided that no application number shall be generated in case of the person applying for Director Identification Number is a national of a country that shares a land border with India, unless necessary security clearance from the Ministry of Home Affairs, Government of India has been attached along with an application for Director Identification Number."

After the insertion of the above proviso, the Rule 10(1) of The Companies (Appointment and Qualification of Directors) Rules, 2014 shall be read as under:

10. Allotment of DIN

(1) On the submission of the Form DIR-3 on the portal and payment of the requisite amount of fees through online mode an application number shall be generated by the system automatically.

Provided that no application number shall be generated in case of the person applying for Director Identification Number is a national of a country that shares a land border with India, unless necessary security clearance from the Ministry of Home Affairs, Government of India has been attached along with an application for Director Identification Number.

Effect of the above amendments

If an application for allotment of Director Identification Number (DIN) is made by any person who is a national of a country that shares a land border with India (i.e. China, Bangladesh, Pakistan, Bhutan, Nepal, Myanmar, and Afghanistan) then no DIN will be allotted until and unless necessary security clearance from the Ministry of Home Affairs, Government of India has been attached along with an application for DIN. Hence prior security clearance from the Ministry of Home Affairs, the Government of India is compulsory to obtain a DIN by any person who is a national of a country that shares a land border with India.

3. In form DIR-12 a declaration is inserted to be opted by a person seeking appointment as director as to whether the national of a country that shares a land border with India has sought necessary security clearance from the Ministry of Home Affairs or not.

Effect of the above amendments

While filing Form DIR-12 with the MCA for the appointment of any person who is a national of a country that shares a land border with India (i.e. China, Bangladesh, Pakistan, Bhutan, Nepal, Myanmar, and Afghanistan) as a Director, Declaration from such person confirming that he/she has sought necessary security clearance from Ministry of Home Affairs or not is required to be obtained by the Company as well as Practicing Professional Certifying the Form DIR-12.

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