As we see, India is also competing with other countries when we talk of economy. The credit for such achievement goes to the companies which are being established here. This is because more companies bring more profit. However, it is important that companies work legally. So, the law makers have made an act called Companies Act, 2013. It is due to this Act, that the companies work properly, within an ambit and fraud by the employees are avoided. Before diving into the main topic that is regarding the NRI director in a private Limited company, we must first understand the meaning of certain terms such as private limited company, NRI etc.
What do you Mean by NRI?
A non- resident of India also called an NRI is an Indian person who has lived outside India for more than 182 days in a financial year. It is important to know that a financial year starts on the first of April and ends on the thirty first of March. We see many Indian people who settle outside India for employment, studies, business etc. These people are nothing but NRI’s. Such people belong to Indian families, however for some reason or the other have preferred to settle outside India. It must be noted that NRIs have Indian citizenship. Such persons are excluded from the criteria of “residents of India”.
What do you Mean by Private Limited Company?
In order to understand the concept of an NRI director in a private Limited company, it is paramount to understand the meaning of Private Limited Company Registration. A private limited company cannot be funded by the general public. It must comprise at least 2 members. Whereas, the maximum limit of members extends to 200. The word “Limited” here means that in case of winding-up or ending of such a company, due to non- payment of loan or debts, recovery cannot be made from personal assets of the members i.e., only assets limited to the company can be used to pay the debts. Therefore, many people prefer to form a Private Limited Company, as it gives protection to them in case of failure.
Understanding of Director in a Private Limited Company
As it is obvious that, any company that is formed requires some human beings to manage its workings and carry out day-to-day activities. Such persons are called the director in a private Limited company. In other words, they act as the guardian of the company who looks after it and nourishes it. It becomes impossible to run a business without its directors.
One question that arises here is who can become a director in a private Limited company? The answer to this question comprises certain conditions which have to be fulfilled in order to become a director. Directors collectively are termed as Board of Directors. First of all, a director is appointed by the people who hold shares in the company keeping in mind certain requirements set up by the Companies Act, 2013. The requirements or conditions are given below:
- must be above 18 years of age
- must be of sound mind and physically fit
- must not be an undischarged insolvent or bankrupt
- must not be sentenced to imprisonment
Rules and Regulations Related to the Director of a Company
Chapter XI, Sections 149- 172 deal with the provisions related to directors of a company. Section 2(10) defines the Board of Directors to be a collective body of directors. Formation of the board of directors is given under Section 149. The minimum number of directors needed to form a public, private and one-person company are 3, 2 and 1 respectively. Whereas, to extend the number of directors above 15, a special resolution is needed to be passed. Amongst them, inclusion of at least one woman director is mandatory. Section 173 deals with the meetings of the directors which are to be held once every 30 days. The directors can be of many types which are enumerated below:
- Managing Directors, who manage affairs of company
- First Directors, who is appointed prior to other directors
- Additional Directors, who is appointed if necessary
- Shadow Directors, who provide guidance to the board of directors, however they are not appointed officially.
Section 154 talks about DIN. Each and every director is given a Director Identification Number (DIN). The DIN number is a unique number allotted by the Government of India, which distinguishes one director from that of another. It contains 8 digits. With its help, information regarding all directors are secured and concealed.
There are 2 ways by which Directors are removed, given under section 169 of act, which are by company and by tribunal. In case of removal of directors by the company, a notice has to be provided before 14 days of the meeting held regarding the removal. The reason behind furnishing such notice is granting an opportunity for the director to present his side. Tribunal too can remove the director from its position, if in case an application is made before it by any person. Section 168 allows directors to resign too.
Can a Foreigner be a Director in a Private Limited Company?
Yes, an NRI or a foreigner can be a director in a private Limited company. In my opinion, having a non- resident of India as a director in an Indian Company adds an advantage to its expansion and progress, viewing the policies followed outside India. As we are already aware that foreign companies expand themselves in a more profitable way as compared to companies in India. Therefore, nothing can be better than having a director in a private Limited company who possesses knowledge of foreign industries, with whose help a private company can flourish within as well as outside India. There can be as many NRI directors in a company. However, among them at least one director should be fully residing in India.
Can an NRI Registered a Private Limited Company in India?
Yes, an NRI has full right to start a Private Limited Company in India. However, to the contrary a one- person company or a partnership company, cannot be formed by an NRI. It must also be kept in mind that at least one Indian person is required in such companies formed by the NRI’s. Similar to the Indian directors, an NRI director too is granted a DIN (Data Identification Number) Number. Once DIN is obtained, the directorship of the director is confirmed. To complete this process, NRI has to submit some documents. They include signature, copy of passport, PAN card, driving license and photograph with the form given below.
Can an NRI Becomes a Shareholder in a Pvt. Ltd. Company?
Yes, as per the provisions of the companies act, an NRI can surely be a shareholder in an Indian Company. Shareholders are none other than persons who hold shares in a company worth certain values and such shareholders can be Indian as well as Non- residents of India. However, such provisions are subjected to certain FDI (Foreign Direct Investment) rules and regulations. The condition regarding the shareholder is similar to the director. There must be at least one shareholder who fully resides in India.
Procedure of Appointment of an NRI Director
Follow the steps given below in order to appoint a NRI director in a private Limited company:
Consent Form
The very step prior to the appointment of an NRI as director in a private Limited company is the consent form. As it is very essential to obtain the official consent of the NRI saying that he/she voluntarily agrees to work as a Director in a company. Hence, Form DIR 2 is used to get the consent officially and after getting the consent one needs to file it before the registrar of the companies.
DSC and DIN
Every director in a private Limited company must have a digital signature certificate. This acts as evidence that the signatures made on further documents are not forged. The Data Identification Number as specified above already, is a must for every director. It acts as an identity of the person as a director of the company. In exceptional cases, if an NRI does not have the DIN, it can be obtained by filling a form called DIR 3 and submitting it to the company subsequent to which a special resolution is passed.
Board of Director Meeting
In order to appoint an NRI as a director in a private Limited company, a meeting of the board of directors is held, in which discussions are made and an NRI is appointed with the consent of all. After the meeting, an appointment letter is provided to the NRI telling about his appointment as a director of the company as well as other related things regarding his appointment as a director of a meeting.
FORM DIR 12
It’s not easy to appoint a NRI that is non-resident Indian as a director in a private Limited company. There are a lot of formalities which need to be done carefully without any mistakes. One such formality is filing of Form DIR 12. After the above procedure, Form DIR 12 is filled and ROC (register of companies) filing is done in 30 days.
Conclusion
Hence, it is concluded that, an NRI can surely register a private limited company as well as act as a director and shareholder in it. Only one condition has to be fulfilled which is having a minimum of one director or shareholder, who is resident of India. Nowadays, there are many NRIs who are looking to invest in a company established in India as Indian Companies seem to be progressing day by day hence they are also interested in becoming director in a private Limited company.
