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Can an NRI Become a Director in a Private Limited Company?

Private limited company in India is the most preferred by businesses as it gives a number of emoluments to entrepreneurs. The Companies Act, 2013 encourages the appointment of NRI directors in private companies. The procedure is similar to the appointment of an Indian resident as a director and requires the submission of requisite documents and the stipulated forms. In this article we shall see how can an nri become a director in a private limited company.

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Can an NRI Become a Director in a Private Limited Company? : Introduction

The idea that India is a land of excellent opportunities is reaffirmed by the fact that a number of foreign companies are now launching their business establishments here. In the recent years, there has been a seamless flow of global multinational corporations (MNCs) who have expanded their operations in India. 

With the increase in foreign collaborations, a number of Indian companies have also felt it to be beneficial to have foreign employees and directors as a part of their businesses. Appointing trusted foreign personnel to the businesses have been beneficial in a wide number of ways. This is often the first step in taking the business across borders.

For businesses with a considerable head count and for the ones that seek to expand quicker, a private limited company is the most suitable corporate entity, as guaranteed by the Companies Act, 2013. It is a legal association of 2 or more persons formed in order to accomplish a common task. The company should have a minimum of 2 to a maximum of 200 members. If the company intends to increase the number of members, it has to convert to a public company. 

For a private Limited Company in India, there are no restrictions to depute a foreigner or an NRI director as long as the appointment is in consonance with the provisions of Foreign Exchange Management Act, 1999 (FEMA), the Securities and Exchange Board of India Act, 1992 (SEBI Act), and the Companies Act, 2013.

Can an NRI Become a Director in a Private Limited Company? : Director in a Private Limited Company:

A private limited company, although is an independent legal person, requires natural persons to execute the corporate dealings. The director of a company is entrusted with the general functions and administrative activities of a company and has to oversee if those are in line with the Companies Act, 2013. The directors of the company together are collectively referred to as the Board of Directors and they work on crucial issues that affect the welfare of the organization. Their decisions and actions to a great extent influence the growth of the company. 

The directors enter into contractual obligations on behalf of the company. However, due to the limited liability a private company offers, the members or the directors are not solely responsible for the debts and liabilities of the company. The directors play a vital role in allotting and transferring shares in the company.

The Procedure for Appointment of an NRI as a Director of a Private Limited Company:

Consent of the Director in Form DIR 2:

The first and foremost step in appointing an NRI director is to obtain the consent of the proposed director in form DIR 2 accompanied by the required documents.

Digital Signature Certificate (DSC) and Director Identification Number (DIN):

A director is required to hold a DSC to authorize the form and documents digitally. Additionally, every director in the board of directors is supposed to have acquired a DIN. The DIN is a unique 8 digit number given to every individual director including the NRI director. If the NRI director does not possess a DIN, it has to be informed to the company, after which it can be obtained by making an application through form DIR 3 and by passing a special resolution in the company. The KYC documents are required to be furnished while filing the form DIR 3 KYC.

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Board Meeting:

The appointment of the NRI director is made in the general meeting of the company. An extraordinary general meeting (EGM) may be held for this purpose and the same has to be notified to all the members and shareholders of the company. Once the notice for EGM is sent to the members and shareholders, the meeting is executed as decided and the necessary resolutions are passed to appoint the NRI director.

Issuing of Appointment  Letter:

After passing the resolution to appoint the NRI director, the appointment letter is awarded to the person thus elected. The letter mentions details pertaining to the terms and conditions of the appointment including the details of salary package of the NRI director.

Filing of Form DIR 12:

Once all the necessary steps are accomplished, the form DIR 12 should be furnished by the company with the Registrar of Companies (RoC) within 30 days from the date of assignation of the NRI director along with the stipulated documents.

Mandatory Documents to be Filed for Appointing an NRI Director:

The following documents are required mandatorily for appointing an NRI director in a private limited company:

  • Passport size photographs of the person to be appointed as the NRI director.
  • A copy of valid Passport of the person to be appointed as the NRI director.
  • Copies of address proofs, which include utility bills like telephone bills, electricity bills etc that are duly notarised.
  • PAN (Permanent Account Number) if applicable.
  • AADHAR card or any such identity proofs as applicable.
  • Form DIR 2, wherein consent to act as director is presented.
  • Copy of the resolution pertaining to the appointment of the NRI director that was passed in the company.
  • Copy of the notice sent to the shareholders and members regarding the extraordinary general meeting.

All the documents listed above must not only be self-attested by the candidate who intends to be     elected as the NRI director but also must be duly notarised and apostille.

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