A foreign group setting up an Indian subsidiary usually wants its own nominees on the board. The Companies Act, 2013 allows that, but it adds a residency condition and some paperwork that takes longer than the incorporation itself.
The resident director rule
Section 149(3) requires every company to have at least one director who has stayed in India for not less than 182 days in the previous calendar year. For a new company, the requirement applies in proportion for the year of incorporation. A private company needs a minimum of two directors, so a common structure is one foreign nominee and one resident director.
DIN and digital signature
- Every director needs a Director Identification Number. For the first directors it can be applied for through the incorporation form.
- A digital signature certificate is needed to sign the electronic forms. Foreign nationals can obtain one with notarised and apostilled identity documents.
- Passport and address proof from the home country must be attested as required, and the originals may be asked for.
Annual KYC and disclosures
Directors must complete the annual DIN KYC and update details when they change. Directors also give disclosures of interest at the first board meeting and at the first meeting of each year, so the company should keep a register.
Practical points
- Choose a resident director who will be available in India and understands the duties, since the liability is personal.
- Plan for document attestation before the incorporation date, not after.
- Keep minutes and registers up to date; board meetings can be held by video, subject to the rules.
A board that is set up correctly at the start avoids later filings to correct names, addresses or residency status.
The author is a M.Com., FCS, LL.B., Partner, A2 Consultants, Hyderabad. The views are personal and for general information only.
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