Important point to be consider in-case directors having frequent visit outside India

CA Deepak Rathore

Clarification on applicability of requirement of resident director

As per Sec 149(3) of the 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 days in the previous calendar year”. This provision applies to all Companies including private companies.

Implication incase of foreign companies :

Effective April 1, 2014, foreign companies are given one year to comply with the new rule. The first compliance year will be calculated from April 1, 2014 to December 31, 2014. The requirement will thus be pro-rated to at least 136 days of residence in the country for the first year, according to General Circular No. 25/2014 released by the Ministry of Corporate Affairs.

Subsidiaries of foreign companies in India will be required to have at least on resident director on its board by 1st April, 2015, in accordance with the updated Companies Act 2013.

The matter has been examined. It is clarified that the, residency requirement’ would be reckoned from the date of commencement of section 149 of the Act i.e. 1st April, 2014, Thee first ,previous calendar year, for compliance with these provisions would, therefore, be Calendar year 2014. The period to be taken into account for compliance with these provisions will be the remaining period of calendar year 2014 (i.e. 1st April to 31st December). Therefore, on a proportionate basis, the number of days for which the director(s) would need to be resident in India. during Calendar year.2014, shall exceed 136 days.

Implication incase of newly incorporated companies :

Newly incorporated companies between 1 April, 2014 and 31 September, 2014 should have a resident director either on the date of incorporation or within six months of that.

Regarding newly incorporated companies it is clarified that companies incorporated between 1.4.2014 to 30.9.2014 should have a resident director either at the incorporation stage itself or within six months of their incorporation. Companies incorporated after 30.09.2014 need to have the resident director from the date of incorporation itself.

PENALTY:

In case of any contravention, then a penalty of up to INR 10,000 will be imposed on the company and every officer of the company. Further, in case of continuing default, a fine of INR 1,000 per day till the date this default continues is applicable.

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