Guest Blog Post Provided by
CS Pronamika Bhattacharya
A Wikipedia search gives us merely 43 names of multinational companies having wholly owned subsidiaries in India. The number of foreign/multinational companies investing in India is far more than that number, in real. However, an investment by a foreign company in India may not always get it a seat in the Board of Directors of the investee organization. The Board of Directors (called as ‘Board’ here from) of any organization located anywhere in the world is the ‘Brain’ of the organization. The correct constitution of the Board in an organization is a mandate of the law but an effective composition defines the destiny of the organization. So, a company which invests in different countries would want to secure its interests and ensure the growth of its stakes by planting its ‘own man’ on the job. While a wholly owned subsidiary (called as ‘WoS’ here from) in India of a Foreign Company wouldn’t have to worry about appointing the directors on the Boards of its WoS. But, in case of a joint venture with an Indian Company or in case of holding of shares (substantial or otherwise) in an Indian Company where the Foreign Company would prefer their representative in the Board, it is important to have a suitable Foreign Director in the Board of the JV/ Indian company. Other instances when an Indian Company can have Foreign Directors in its Board are, when it has overseas investments or when as part of its growth strategy it wants to bring in certain kind of technical expertise in the Board by appointing a Foreign Director.
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| Foreign directors in Indian Companies |
A Wikipedia search gives us merely 43 names of multinational companies having wholly owned subsidiaries in India. The number of foreign/multinational companies investing in India is far more than that number, in real. However, an investment by a foreign company in India may not always get it a seat in the Board of Directors of the investee organization. The Board of Directors (called as ‘Board’ here from) of any organization located anywhere in the world is the ‘Brain’ of the organization. The correct constitution of the Board in an organization is a mandate of the law but an effective composition defines the destiny of the organization. So, a company which invests in different countries would want to secure its interests and ensure the growth of its stakes by planting its ‘own man’ on the job. While a wholly owned subsidiary (called as ‘WoS’ here from) in India of a Foreign Company wouldn’t have to worry about appointing the directors on the Boards of its WoS. But, in case of a joint venture with an Indian Company or in case of holding of shares (substantial or otherwise) in an Indian Company where the Foreign Company would prefer their representative in the Board, it is important to have a suitable Foreign Director in the Board of the JV/ Indian company. Other instances when an Indian Company can have Foreign Directors in its Board are, when it has overseas investments or when as part of its growth strategy it wants to bring in certain kind of technical expertise in the Board by appointing a Foreign Director.
Director Identification Number (DIN) relevance
Any individual who seeks for an
appointment as a Director in the Board of a Company registered under the
Companies Act 2013 or the Act of 1956 is required to have a DIN under sections
153 & 154 of the Companies Act 2013.
The concept of DIN was introduced by
inserting sections 266A & 266B in the Companies Act 1956. DIN is obtained
by providing personal details of the individual seeking appointment as a
Director in India. This is a unique number relating to an individual and does
not change with changing directorships. It enables identifying individuals who
are Directors in Companies, to fix accountability and responsibility in the
event of allegations of Fraud against the Company and its Directors or
officers.
The Office of Regional Director, Ministry
of Corporate Affairs (called as ‘MCA’ here from) allots this number and
verifies it against the PAN (in case of Indian Director) or Passport number (in
case of Foreign Director). Obtaining the DIN for the individuals to be
appointed as Directors is a pre-incorporation requisite for a company.
Once a DIN is allotted to the
individual applicant, he can use that number for his appointments as Director
in all companies in India. Further, he has been cast with the duty to intimate
any changes in the details provided at the time of applying for DIN.
Applying for DIN by Foreign directors
Application for DIN
is required to be made in eForm DIR-3 available in the MCA website. Along with
the eForm following documents should be provided as attachments to support the
application:
·
High resolution photograph
of the applicant
·
Copy of Passport (for
Foreign Applicants)
·
Present Address
proof which should not be older than 2 months
·
Verification as per eForm
DIR-4 available in the MCA website
All
supporting documents including photograph should be certified by the Indian
Embassy or a notary in the home country of the applicant or by the Managing
Director / CEO / Company Secretary of the company registered in India, in which
applicant is a director. If a foreign director has a valid multiple-entry
Indian visa or Person of Indian Origin card or Overseas Citizen of India card,
then the attestation could also be done by Public Notary / Gazetted Officer in
India or practicing CA / CS / CWA.[1]
The eForm DIR-3 is
required to be digitally signed by the applicant & a practicing
professional in case of new company, a practicing professional or a member of Institute
of Company Secretaries of India in whole time employment or a director in case
of an existing company, before uploading on MCA21 portal. Upon upload, fees for
eForm DIR-3 is to be paid electronically. The DIN application is processed only
after receipt of fees. The applicant is required to get registered on the MCA21
Portal to obtain login id, which is necessary for payment of the fees. Thereafter,
based on the certification received in the eForm DIR-3 an email is received by
the applicant stating that the allotment status of the DIN.
Any change in details registered under a DIN needs to be updated by using
eForm DIR-6 & eForm DIR-7 along with relevant supporting attachments.
Multiple Definitions
Section
149(3) of the Companies Act 2013, allows a Company to have a Board comprising
of only one Resident Director i.e. at least 1 Director who has stayed in India
for a total period of at least 182 days in the ‘previous calendar year’. Such a
Director need not be an Indian Citizen.
Section
6 of the Income Tax Act[2] provides
that, an individual will be treated as a resident in India (different from
ordinarily resident in India) in any ‘previous financial year’ if he fulfills
any of the following two conditions:
(a)
he/she is in India in that year for period or periods amounting in all to 182
days or more, or
(b)
Having within the four years preceding that year been in India for a period or
periods amounting in all to 365 days or more, and has been in India for 60 days
or more in that year.
A person
residing in India for more than one hundred and eighty-two days during the
course of the preceding financial year, but does not include a person who has
come to or stays in India, otherwise than-
a. for
or on taking up employment in India, or
b. for carrying on in India a business or vocation
India, or
c. for any other purpose, in such circumstances as would indicate his
intention to stay in India for an uncertain period;
Writing Sources for the Article
[1] http://www.mca.gov.in/mca/html/mcav2_en/home/helpandfaq/dinprocess/dinprocess.html
[2] http://www.incometaxindia.gov.in/pages/acts/income-tax-act.aspx
[3] http://www.advocatekhoj.com/library/bareacts/foreignexchange/2.php?Title=Foreign%20Exchange%20Management%20Act,%201999&STitle=Definitions
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