November 29, 2023 at 10:05 AM
As we know India has become the 5th largest economy in the world and by 2050 it will come in the list of the top 3 world largest economies in the world. Because of this huge achievement, India has become one of the most desirable countries in the globe for Foreign Investors, due to which Foreign Nationals want to enter the Indian Markets in any way possible. India also offers Foreign Investors various business opportunities & a huge consumer market for their services, which helps develop good exposure in the huge Asian Market. A Foreign National can be appointed as an Independent Director or an Executive Director in an Indian Company. So, the Appointment of Foreign Directors in Indian Companies not only provides big exposure to Foreign Individuals in the Indian Market but also provides business opportunities to expand their business worldwide. In this article, we will discuss the appointment of Foreign Directors in Indian Companies.
In India, every company is established under the Companies Act, of 2013. An Indian Company can be registered with a Foreign Director in India under the Companies Act. The Board of Directors manages the Company and can comprise Foreign Nationals & Indian Residents. However, an Indian Company must have at least 1 Director who is an Indian Citizen.
As per Companies Act, 2013, a Director is an individual appointed to the Company’s Board. The Directors of a Company manage all the Company’s Affairs & are the Company’s head. The Company’s Directors are jointly known as the BoDs (Board of Directors). The Company’s Board is also responsible for safeguarding the Shareholders’ interests. Under the Companies Act, an individual can be appointed as one of the following types of Director:
Note: The Companies Act, 2013 doesn’t forbid Foreign Nationals from being appointed as Directors of a Company. Hence, Foreign Nationals can be appointed as any one of the Directors as we mentioned above in Indian Companies.
The following are the advantages of the appointment of Foreign Directors in Indian Companies:
The following are the eligibility criteria for the appointment of Foreign Directors in Indian Companies:
Following is the documentation required for the appointment of Foreign Directors in Indian Companies:
Following is the step-by-step procedure for the appointment of Foreign Directors in Indian Companies:
Step 1: First, you need to obtain DSC (Digital Signature Certificate) and DIN (Director Identification Number) for the proposed Director of the Company.
Step 2: After obtaining DSC and DIN for all the proposed Directors, you need to prepare & file all the necessary for the appointment of Foreign Director in Indian Companies including DIN application, and submit them to the ROC.
Step 3: Then, the Registrar of Companies will approve the application & issue the DIN.
Step 4: Once all the above steps are completed, the Company can appoint the foreign national as a Director.
Step 5: The appointment of the Foreign Director is completed after filing the DIR-12 Form for the Company. The DIR-12 Form contains details like Appointment Date, 1st Director’s Declaration & Declaration of the new Director along with the basic information of the Foreigner or Foreign National.
The income of a Foreign National or Individual as a Director of an Indian Company is taxable under the Income Tax Act, of 1961. The required TDS will be deducted from their remuneration/commission according to the provisions of the Act. Under the Income Tax Act, of 1961, a Foreign Individual who is a Company’s Director in India must get a PAN Card mandatorily if he or she is having a financial transaction of Rs. 2.5 lakhs or more in F.Y (Financial Year).
A Foreign Individual appointed as a Director is eligible to receive a commission, remuneration & sitting fees like Indian Directors. Hence, they must follow the provisions of the FEMA Act, of 1999. Foreign Individuals wanting to be a Director in an Indian Company should hold a valid Employment Visa. They can hold & maintain a Foreign Currency account with a bank located outside India. They can receive or remit the complete salary paid to them as Directors of an Indian Company.
When Indian Companies appoint Foreign Nationals as Directors, the companies should make a remittance application for their remuneration to the authorized dealers with an undertaking Certificate & Statement concerning payment of Income Tax.
For the growth of the Indian Economy & globalization, the appointment of Foreign Directors in Indian Companies is one of the most important steps. The incorporation of a Company with Foreign Directors is not prohibited, but some requirements should be met. The process for the appointment of Foreign Directors in Indian Companies is the same as for an Indian Director, but some extra requirements should be met.