Resident Director

Resident director requirement (Section 149 (3) of the Companies Act, 2013) is a form of local representation; some of the countries refer it as nominee director. In India, even foreign nationals who meet the criteria of having stayed in India for a certain period (182 days during the financial year)  also can be appointed as resident director. The eligibility is not dependent on the citizenship of the proposed director but on the period he / she has stayed in India.

Expectations from a Resident Director in India

Non-resident clients have varied outlook and expectations from a resident director and therefore, their need varies. Companies having presence in various countries have established systems and procedures. They prefer a no-conflict, safe and conservative arrangement, a clear segregation of the board and the employees. A resident director is an experienced professional and is familiar with Indian laws who can provide or add value to the Indian company.

In many other cases, the businesses just need an entity in India to begin with, a kind of presence that doesn’t require any long term binds. These Companies do not hire any employee in India. They avoid taking any physical space as well, just a virtual address is enough. Everything is managed from outside and consulting firms provide all the necessary support including resident director services. The bank account is operated by the promoters from outside.

We have also seen some clients who prefer to have one of their prospective employees in India to take the position of directorship and save some cost during their initial period while navigating the new territory. This strategy may very well work for them and the need may not arise for appointing one from an outside consulting firm.

Suggested board structure and meetings

It is recommended that the company should have majority on the board through which they exercise control. Though the Indian law permits holding board meeting through video conference, it may just be a little convenient to hold physical board meetings outside India where the resident director is not attending. A director is required to attend at least one board meeting in a year to stay on the board and not to attract disqualification. Company is required to convene and hold a minimum of four board meetings in a year.

Powers of a Resident Director, operation of bank account and the conflict

Even if a resident director position is akin to independent and non-executive (not an employee), he has powers and duties prescribed under the law. While all the powers can be exercised only through the board and not independently, some safeguards may be helpful to meet certain eventualities like misrepresentation, etc.

Requiring the nominated director to execute any document, financials, agreement, or representations can be avoided unless circumstances necessitate otherwise. Similarly, since resident director in most cases is an outside person, it would be quite unnecessary to include him as a signatory to a bank account.

You may like to read:

• • Liabilities of Non-Executive Directors
  • Appointment of Foreign National as a Director

Resident Director Services in India

• We nominate one of our professionals to your Board to comply with the law of the land.

• As a professional, we will act as a non-executive Director and our role in the Board will be for liaising with regulatory authorities for timely approval of registrations and advising Board on compliances under Company Law, Taxation or other laws and regulations, as per scope stated and agreed mutually.

• The nominated director shall not act as a signatory to any Bank Account of the Company.

• The nominated director will not play any role in day-to-day management, business operations, accounting and financial decision making.

Terms of Resident Director Services in India

• We offer Resident Director Service to clients along with Periodic and Annual Compliance services. These compliances help in maintaining the company in good standing.

• A legal contract defining the terms and conditions and limitations of the Resident Director is entered into.

• Company will be required to procure Directors’ and Officers’ Liability insurance.

You may also like to read:

• • Incorporating a Private Limited Company in India – Non-Resident Perspective