Local Resident Director Service in India
According to the Companies Act, 2013 of India, it is mandatory for foreign companies to appoint a Resident Director in India if they want to set up a subsidiary, joint venture or branch office in the country.
The relevant section is Section 149 (1) of the Companies Act, 2013, which states:
“Every company shall have a whole-time director or a manager who has been residing in India for a total period of not less than 182 days in the immediately preceding calendar year.”
Therefore, it is mandatory for foreign companies to appoint a Resident Director who has been residing in India for a minimum of 182 days in the preceding calendar year. This requirement is to ensure that the company has a local representative who is familiar with the laws and regulations of the country and can assist the company with its operations in India.
Incorporating a foreign subsidiary in India can be a complex and challenging process, especially for foreign companies looking to establish a presence in the country. One crucial aspect of this process is the appointment of a local resident director. In this blog article, we will explore the role of a local resident director in India and the services they provide to foreign companies during the incorporation process.
What is Local Resident Director?
In India, the Companies Act, 2013, mandates that every company registered in the country must have at least one director who is a resident of India. This requirement is essential for ensuring compliance with Indian laws and regulations and facilitating smooth business operations within the country.
A local resident director is an individual who meets the following criteria:
- Is a citizen of India.
- Has stayed in India for at least 182 days during the previous calendar year.
- Holds a valid Permanent Account Number (PAN) in India.
- Is not disqualified under any law from being appointed as a director.
Services Provided by a Local Resident Director:
Legal Compliance: One of the primary responsibilities of a local resident director is to ensure that the foreign subsidiary complies with all applicable Indian laws and regulations. This includes adhering to tax laws, labor laws, and corporate governance norms.
Representing the Company: The local resident director serves as the official face of the foreign subsidiary in India. They can represent the company in legal proceedings, sign legal documents, and communicate with Indian authorities on behalf of the company.
Board Meetings: The local resident director is required to attend board meetings of the foreign subsidiary in India. Their presence is crucial for decision-making and governance within the company.
Taxation and Financial Matters: The local resident director plays a vital role in ensuring that the foreign subsidiary meets its tax obligations in India. They may work closely with the finance and accounting teams to handle financial matters and ensure timely tax filings.
Address for Communication: The local resident director provides an official address for communication with Indian authorities. This address is often the registered office of the company.
Compliance Reporting: They are responsible for filing various compliance reports with the Registrar of Companies (RoC) and other relevant authorities as required by law.
Local Market Insight: A local resident director can provide valuable insights into the Indian market, business culture, and regulatory landscape. This information can be crucial for the foreign subsidiary's strategic decisions.
How to Appoint a Local Resident Director:
How to Appoint a Local Resident Director:
Appointing a local resident director for a foreign subsidiary in India typically involves the following steps:
- Identify a suitable candidate who meets the eligibility criteria.
- Obtain their consent to act as a director.
- Appoint them through the board resolution of the foreign subsidiary.
- Ensure they have a valid PAN card and other necessary documentation.
- Update the company's records with their appointment and contact details.
Conclusion
In conclusion, a local resident director plays a pivotal role in the successful incorporation and operation of a foreign subsidiary in India. They ensure legal compliance, represent the company, and provide valuable local insights. Foreign companies seeking to establish a presence in India should carefully select and appoint a qualified local resident director to navigate the complexities of the Indian business environment effectively.
