Exemption from Non-compliance of minimum residency of Director/Partner in India for a period of at least 182 days in FY 2020-21 for Companies and LLPs

(MCA Circular no. 36/2020 dated 20th October, 2020)

In order to support and enable Companies and Limited Liability Partnerships (LLPs) in India to focus on taking necessary special measures to address the COVID-19 threat, including the economic disruptions caused by it, the Ministry of Corporate Affairs (MCA) have announced and implemented many measures to reduce their compliance burden and other risks:

Accordingly, MCA vide General Circular No. 11 /2020, dated 24th March, 2020, stated “VII. Non-compliance of minimums residency in India for a period of at least 182 days by at least one director of every company, under Section 149 of the CA-1 3 shall not be treated as a non-compliance for the financial year 2019-20..”

However, India could not come up from the adverse effect of pandemic Covid-19 even in the month of October, 2020. Keeping in view requests received from various stakeholders seeking relaxation from residency requirement of 182 days in the year and after due examination, MCA has again vide General Circular No.36/2020 dated 20th October, 2020, clarified that non-compliance of minimum residency in India for a period of at least 182 days in a year, by at least one director in every company, u/s 149 of the Companies Act, 2013 shall not be treated as non-compliance for the financial year 2020-2021 also.

For the purpose of having better clarity, I hereby reproduce relevant provisions of Section 149 (Appointment And Qualifications Of Directors) of the Companies Act, 2013 and section 7 (Designated partners) of the LLP Act, 2008 as amended till date:-

149 (3) of Companies Act, 2013 – Every company shall have at least one director who stays in India for a total period of not less than one hundred and eighty-two days during the financial year:

Provided that in case of a newly incorporated company the requirement under this sub-section shall apply proportionately at the end of the financial year in which it is incorporated.

7(1) of LLP Act, 2008 – Every limited liability partnership shall have at least two designated partners who are individuals and at least one of them shall be a resident in India..”, Explanation.—For the purposes of this section, the term “resident in India” means a person who has stayed in India for a period of not less than one hundred and eighty-two days during the immediately preceding one year”.

The logic of provisions of section 149(3) of the Companies Act, 2013 and 7(1) of the LLP Act, 2008 are to implement better corporate governance in Company/LLP. However, imposition of restrictions over international flights due to pandemic Covid-19 and to support the economy, the requirement of minimum residency in India for a period of at least 182 days during the financial year as mentioned in provisions of section 149(3) have been dealt with by the MCA for Financial years 2019-20 and 2020-21.

The Author can be contacted at email id roopalcs2001p@gmail.com.

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