TAXAJ

Resident & Nominee Director for Foreign Company

As per the Companies Act, 2013, the Act does not restrict foreign individuals to become a director in the company situated in India. The foreign individual or non-resident Indians residing out of India can become an executive or a non-executive/independent director of Indian companies whether public listed or unlisted or private. As per section 2(34) of the Companies Act 2013, the “director” means a director appointed to the Board of a company.

The foreign individuals or a non-resident Indian can be appointed as a Director in the Company by complying with the Act read along with the Companies (Appointment and Qualifications of Directors) Rules, 2014.  A foreign national can be appointed to the positions of Women Director, Independent Director, Small Shareholders Director, Additional Director, Alternative and Nominee Director in Indian Companies.

The foreign national or a non-resident Indian can also be appointed as a Whole Time Director (“WTD”) or Managing Director (“MD”) subject to the compliance of rules given in Part 1 of Schedule V of the Companies Act, 2013 which defines the qualification for appointment of a Managing or Whole Time Director or a Manager without the approval of Central Government. One of the conditions of Part 1 of schedule V of the Act states that a person appointed as whole time director or managing director should be a resident of India.

Appointing Resident Indian Director in Company

TAXAJ offers Nominee Director India services for our international clients. Our full-service package includes India company registration, local company and registered address, nominee director services, free trade zone company formation, work visa application, corporate bank account opening and financial license applications.


If you are a business owner planning to expand your business into India, you may be confused by the phrases "Nominee Director India" and "India resident director". Read on to find out more about the definitions of these phrases and how they pertain to your India business.

What is a Nominee Director & Why is it Needed?

• As per the rules laid out in Section 149 (3) of India's 2013 Companies Act, all Indian businesses will need to have a resident director. To be considered a resident, this candidate must reside in India for a minimum of 182 days per year.


• A nominee director then refers to a qualified person who is appointed as your Indian entity's resident director. The appointment of a nominee director by a Board for an Indian business is authorized under Section 161(3) of the Companies Act.


• Although the Ministry of Corporate Affairs waved the resident director requirement for the financial years of 2019 to 2021 given the difficulties in acquiring a resident director during the COVID-19 pandemic, the Ministry did not extend this to the financial year of 2021 to 2022, hence new entities incorporated in 2021 onwards would still have to appoint a resident director to fill the role.


• As finding a suitable candidate to take up the position of nominee director in India is time-consuming and challenging. TAXAJ serves to bridge this gap by providing a cost-effective nominee and resident director service in India, ensuring that all our clients can fulfil the India minimum officeholder requirements.

All you need to know about Nominee Director Services in India!

"Our experience in managing the needs of international business and acting in the capacity of resident director for Australian subsidiaries of overseas entities is second to none."

For any overseas company looking to establish an Indian Subsidiary, it is a necessary and a regulatory requirement to appoint a resident director. Securing your business in India can be a daunting task, and we are here to support you with your business decisions by providing you with the guidance needed to get it right the first time. We can help you with the below mentioned services and more:

  • Incorporation of Indian Entity, including managing the setup of Indian Tax Office.
  • Oversee Banking requirements in the initial setup
  • Provide appropriate indemnities to protect the resident director and ensure non-resident directors have complete control over the Indian  operations
  • Arrange for your Indian operations to have a substituted year-end in line with head office operations
  • Implement financial control and systems to manage the accounting affairs of the Indian operations in line with the reporting
  • requirements of your head office operations
  • Provide our expertise to manage the day-to-day accounting needs of the Indian operations
  • Manage the ongoing financial reporting and tax compliance needs of the Indian operations to ensure the company’s affairs are accurate and lodged on time to the necessary regulatory bodies
  • Provide consultative advice and support for the successful growth of the Indian operations

Under what conditions can an India company appoint a nominee director by the Companies Act?

There are certain conditions that must be met before the nominee director can be appointed. These are:


> The Appointment must comply with the conditions of any applicable legal contract the company is a part of, as well as applicable corporate laws in India.

> Parties who can appoint a director can be natural persons who possess the legal authority to do so, or a State or Central government in India.

> The nominee must represent the company or institutions' best interests at all times.

> The appointment must comply with the clauses of the business' Articles of Association, otherwise, the Articles of Association will need to first be amended to include provisions for the appointment of such a director.

Legal duties of the India nominee director

Section 116 of the Companies Act makes provisions for the duties of the nominee director and terms that he or she abide by. These include:


> To act in the best interests of the company and in good faith for the company's and company members' wellbeing.

> To avoid any conflict of interest.

> To carry out duties with skill, care & Intelligence.

> To monitor the company's activities to ensure compliance with all regulations and laws.

> Will be held personally liable towards the company and nominator.

> Must not attempt to gain any inappropriate advantage to self or to external parties associated with the dire will have to pay compensation to the company if found guilty of such acts.

> Must participate actively in board meetings and non-executive decisions.

> To comply with the Articles of Association

What will the nominee director or Shareholder require before agreeing to act?

A nominee director will generally require you to:

  • Provide them with an overview of the company’s current and proposed activities;
  • Provide your business plan, forecasts and budgets;
  • Provide any advice that you have that confirms the activities of the company comply with Indian local laws, (e.g. local licensing requirements, consumer laws, importation laws, tax laws, TGA approvals, etc)
  • Provide evidence of your financial standing, or the financial standing of the foreign company holding the shares in the Indian company – to show that the company will remain solvent;
  • Confirm that the company has appointed a local accountant and Tax Agent;
  • Agree to provide regular financial and operational reports, and to provide them direct access to your local accountant and Tax Agent;
  • Agree to their fees and charges for acting as a director; and
  • Agree to indemnify the company and the nominee director for any liabilities that the company is not able to meet in India, in order to avoid insolvency. This will generally make either you, or the foreign parent company, liable for the debts and obligations of the Indian company.

We will only provide Nominee Director Services on the following conditions:

    • We receive the proof of identity and proof of address (utility bill/bank statement not older than 3 months) on the beneficial owner. Scan copy to start the process but we will require certified original copies by post within 2 weeks.
    • Reference letter on the UBO from the bank, employer, accountant OR solicitor who has known him/her for over 2 years.
    • We will need to know reasons for requiring a Nominee Director
    • We will need to know the nature of the business
    • The company's registered office should be with us
    • We expect to see relevant information on how the business is being conducted. The annual accounts of the company should be done with us as the director needs to sign the accounts.
    • If the company is GST registered, the GST returns must be done by our accountant.
    • In the case the client wants to dissolve the company, he must inform us. We will terminate ourselves and will not act as a director at the time of dissolution if the company is older than a year.


    A Nominee Shareholder would represent the shareholder of the company and will be used for security reasons to protect the personal information of the actual shareholder. A contracted Nominee Shareholder will disclose the necessary information such as ID and passport numbers without you having to share what you do not want to.

    Contracting a Nominee Shareholder requires you to protect your rights to your shares with Nominee Shareholder issuing a Declaration of Trust that certifies your full ownership of your shares while the nominee represents you.


Advantages of using Nominee Director Service in India

Meet residency requirements while saving overhead costs

• Appointing a representative director in India will not only allow your business to remain compliant with local corporate regulations, but also enable you to save overhead expenses. This will prevent your business from incurring additional costs during the incorporation process.


Possesses relevant knowledge of local regulations to ensure compliance

• The India representative director will possess knowledge and experience of local regulations, including annual accounting and tax obligations, to ensure your entity's compliance. Our nominees will all possess the relevant qualifications and expertise to be able to monitor your corporate activities strictly to ensure full compliance with legal regulations.


Navigate language barrier

• The resident director India is also able to bridge language barriers and act as a local representative. As corporate and copyright legal documents in India may be written in the official language of Hindi, and business meetings and communication within the country may also be in Hindi, engaging our nominee director service India will allow you to more easily navigate and circumvent the language barriers. The local nominee will be able to assist you in translating documents to and from Hindi, speeding up the paperwork procedures greatly.


Legal duty to act in company's best interest

• In addition, as one of the directors, the nominee director is bound by law under the Companies Act 2013 to act in the best interests of your company, instead of in his or her own self-interest, hence you will not have to worry about a conflict of interest.


Act as local representative to banks and authorities

• When you are opening an India corporate bank account for your newly established entity, local banks may require a local representative to visit a local branch for an interview. At no additional fees, our qualified India representative director will attend the interview on your behalf.


Minimal role that will not undermine your authority over your company

• Engaging a resident director service will allow you to fulfil the required director residency requirements without interfering in the day-to-day operations of your company, so that you can maintain full control of your company. Unless specifically requested, nominee directors will not be a bank signatory nor have a significant role in your company's decision-making process.

Risks of appointing a nominee director in India


  • As with all undertakings, there are some risks involved in the appointing of nominee directors. The risk is namely that the individual, as one of the company's directors, has the legal power to participate in the decision-making process and even veto certain decisions of the company, according to the Companies Act.
  • However, as nominee directors are also bound by law under Section 166 of the 2013 Companies Act to always act in the company' best interests instead of his or her own self-interest, you will not have to worry about him or her making decisions that threaten your company.
  • In addition, before the appointment, Tetra Consultants' legal team will lay out strict terms in the Nominee Director Agreement we will draft, that will prohibit the nominated person from interfering significantly in the day-to-day running of your business. The nominee director will mostly take a passive role and act on your instructions, and he or she will not have access to your corporate bank account. This will ensure that you are able to maintain full control over your company at all times.

Risks undertaken by a nominee director India under the 2013 Companies Act

  • There are also some personal risks that will be undertaken by the representative director, in agreeing to play the role for your company.
  • Under Section 166 of the Companies Act, executive and non-executive directors are seen as the same in the eyes of the law, with the same authorities and duties. Consequently, under Section 149(2), nominee directors will also be held liable under the law in the case where the nominee director was aware of the offense or mistake or if it occurred due to his or her negligence.
  • In addition, under Section 167 of the Companies Act, in the event that a nominee director fails to uphold any legal duties or comply with any regulations, such as being found guilty of any criminal offence or not attending board meetings, he or she can be disqualified from office.
  • Under the agreement of the shareholder, the nominee director is also liable to uphold and represent the nominator's interests and rights.
  • Other Foreign Company Services:

    For any overseas company looking to establish an Indian subsidiary, we can provide a number of additional business registration and support services as required.

     These services include the following (however additional services can be arranged on as needed basis):

    • Establishment of a new Private/Public Limited Company
    • Registration for GST (Goods and Services Tax)
    • Opening of a business bank account
    • Provision of a Registered Office Address in India
    • Provision of a business address facility in India
    • Related corporate secretarial services

     

    For further information about our services including pricing please contact us.

    Are you looking for Resident Director in India?

    As per the provisions of sub section (3) of section 149 of companies Act, 2013, Every company shall have at least one director who has stayed in India for a total period of not less than one hundred and eighty-two (182) days in the previous calendar year. This Provision applies to all the companies w.e.f. 26th June, 2014. Wholly owned subsidiary Companies with only Foreign Directors are mainly impacted by this provision of companies Act, 2013.

    Power and Duties of Nominee/Resident Director:

    Resident/ Nominee Director shall have all the power and duties which are define for other Director of the company but subject to the approval of Board. He shall abide by all the provision for directors defines under Companies Act, 2013.

    Penal Provisions

    If a company contravenes this provision of companies act, 2013 then the company and every officer of company who is in default shall be punishable with fine which shall not be less than fifty thousand rupees but which may extend to five lakh rupees.

    How TAXAJ can help?

      • We will appoint one of our team members as the Resident Director for your company.
      • Nominee director appointee will neither be a corporate bank account signatory nor play a active role in our your business.
      • Nominee director merely the resident director of the company in order to fulfill the local statutory requirement (law of land requirement).
      • You will be solely responsible for daily business activities.
      • You will sign a legal contract outlining the terms and conditions and limitations of the resident director’s appointment.
      • You can ask our nominee director to resign at any point of time.
      • Nominee director will sign all the key corporate documents which are obligatory to be signed by the director to comply with the law of land.


      For example: Annual return, Financial Statements and other key docs as may be required by law.

      • You must have a vigorous system to comply with the law of land. You may ask for our annual compliance and maintenance of statutory records & registers services.
      • Our fees for resident director services will depend upon the level of risk in the business the same shall be provided upon request.
      • Our client may also avail the service of shareholder as well as Annual Compliance Services.