Both founders live abroad: who is your resident director?
Section 149(3) needs one director who stays in India 182 days a year. How the rule works for foreign founders, the first-year proportion, and day-count traps.
CA Harun Raaj
makeitlegit.in
Every Indian company needs a board of individuals, and every board needs someone who actually spends time in India. Founders based abroad usually clear the first test easily and trip on the second.
Board composition: the easy test
"Every company shall have a Board of Directors consisting of individuals as directors." The minimum is three directors for a public company, two for a private company and one for a One Person Company. The maximum is fifteen, and a company may appoint more than fifteen after passing a special resolution under section 114(2) (s.149(1)(a)-(b) and first proviso, Companies Act 2013). Two foreign founders forming a private limited company satisfy the numbers without trouble. The test that causes problems is residence.
The 182-day rule
The statute says: "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." (s.149(3), Companies Act 2013)
Three points follow from the words themselves.
- It is one director, not the board. The rule asks for "at least one director" who stays the required period. Two directors who each spend about 100 days in India do not satisfy it, even though together they are in India for more than 182 days.
- It is a total, not a stretch. The wording is "a total period", so separate visits add up across the financial year. Nothing in the text requires the days to be continuous.
- It is measured per financial year. The financial year ends on 31 March (s.2(41), Companies Act 2013), so the count restarts every 1 April.
The first-year proviso
The sub-section carries a proviso for new companies: "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." (s.149(3) proviso)
Two things to take from it. First, the proviso softens the number for the first year; it does not suspend the rule. The requirement still applies at the end of that financial year. Second, the Act does not spell out a formula for "proportionately" in this sub-section, so do not assume a particular arithmetic. Plan the first year so that one director has comfortably stayed in India for the proportionate share of the days the company existed, and confirm the working with your CA.
The definition of financial year matters here. A company incorporated on or after 1 January has a first financial year that runs to 31 March of the following year (s.2(41), Companies Act 2013). So a company incorporated in February has a first year of about thirteen months, not about six weeks. Check the actual first year-end for your incorporation date before you plan travel.
After the first year ends, the full 182 days applies in every financial year. Teams that scrape through year one on the proportion sometimes assume year two works the same way. It does not.
Who can be the resident director
The rule counts days stayed in India by a director. The section does not limit this to Indian citizens or to executive directors, and it does not require a shareholding. What it does require is that the person is a director: the board consists of individuals, so a company cannot meet the rule through a corporate body, and a presence in India by someone who is not on the board does not count.
Appointment timing therefore matters in practice. A resident who joins the board in March contributes only the days after joining. Appoint the intended resident director as part of the incorporation itself, instead of planning to add one later, so that every day in India counts from the start. For the appointment mechanics themselves, see our article on director appointment under sections 152 to 161 of the Companies Act 2013.
Nominee and resident are different jobs
A foreign parent often appoints a nominee director to protect its interests and assumes that this also solves residence. The two roles answer different questions. A nomination says whose interests a director represents. Section 149(3) asks only where a director physically stayed. A nominee who lives abroad contributes nothing to the 182 days.
If the parent wants a nominee, appoint two people: the nominee abroad and a separate director who lives in India. Do not ask one person to be both unless that person genuinely will be in India for the required period.
A professional resident director with no shareholding satisfies the residence rule just as well as a founder does. The rule does not ask for ownership. Any arrangement about authority, remuneration or insurance for that person is a matter to settle in writing with your advisers, because the Companies Act residence rule does not decide it.
Worked day-count patterns
These are illustrations of the text, not rulings on any particular facts.
Pattern one. Founder A lives in Bengaluru throughout the year and Founder B lives in Singapore and visits quarterly. A clears 182 days alone. The company complies, because the rule asks for one such director.
Pattern two. Both founders shuttle and each spends about 100 days in India. Neither reaches 182 individually, so the company does not meet the rule for that year. The text measures a director's stay, not the board's combined travel. One of them must cross the line alone, or a third director must.
Pattern three. The only India-based director resigns during the year with 150 days banked, and the replacement joins later with only 40 days in that year. Neither reaches 182, so the company has no qualifying director for that financial year unless another continuing director does. Before accepting a resignation, check the accumulated days of every director who remains, and appoint a replacement early enough that someone still crosses the line.
Pattern four. A newly incorporated company has two non-resident founders and no India-based director. The proviso adjusts the number for the first year but does not remove the requirement, so the gap shows up at that first year-end. Name the resident director before you incorporate.
What breaks most often
- Founder-directors who "visit often" but never total 182 days.
- Counting the days of a consultant or adviser who is not on the board.
- Reading "proportionately" in the first year as "exempt".
- Rotating the resident director out mid-year without checking whether the replacement, or any continuing director, has the days.
- Relying on memory instead of passport stamps and travel records.
Keep a day-count sheet
For each director and each financial year, keep a simple sheet showing entry and exit dates taken from travel documents, not from recollection. Review it at board meetings and whenever a director's circumstances change (a new role abroad, a family move, a visa change). A mid-year change can break the total without anyone noticing until the year-end.
What it costs to get this wrong
Section 149 is in the Chapter of the Act on appointment and qualifications of directors. For a default in that Chapter where no specific penalty is provided, section 172 provides a penalty of fifty thousand rupees on the company and on every officer in default, with a further five hundred rupees for each day the failure continues, up to three lakh rupees for the company and one lakh rupees for an officer in default (s.172, Companies Act 2013). Section 149(3) itself does not state a separate penalty, so section 172 is the one to check with your CA. The cure for a missed year is not available after the fact: the days cannot be added once the financial year has closed.
What to do now
- Next step: name your resident director before you apply for incorporation, and confirm that person can realistically be in India for the required period (s.149(3)).
- Deadline: the test is applied for the financial year, which ends on 31 March (s.2(41)). For a new company the requirement applies proportionately at the end of the financial year in which it is incorporated (s.149(3) proviso). If you incorporate on or after 1 January, that first year runs to 31 March of the following year (s.2(41)).
- Consequence of missing it: a default in the Chapter attracts the penalty under section 172: ₹50,000, plus ₹500 a day for continuing failure, capped at ₹3,00,000 for the company and ₹1,00,000 for an officer in default (s.172).
Have a CA review your facts before you act or file.
FAQ
How many directors does a private company need?
At least two, and the board must consist of individuals (s.149(1)(a)).
What is the resident-director rule?
Every company must have at least one director who stays in India for a total period of not less than 182 days during the financial year (s.149(3)).
We incorporated mid-year. Is the first year exempt?
No. For a newly incorporated company the requirement applies proportionately at the end of the financial year in which it is incorporated (s.149(3) proviso).
Can our foreign nominee living abroad be the resident director?
Only if that person actually stays in India for the required period. A nomination does not count as residence; the test is days stayed in India by a director (s.149(3)).
Must the 182 days be continuous?
No. The text refers to "a total period" of not less than 182 days during the financial year (s.149(3)).
Can the days of two directors be added together?
No. The rule asks for at least one director who individually stays the required period (s.149(3)).
This article is general information, not advice on your facts. Companies Act 2013 as shown on India Code, checked against the text on 2 November 2026.
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See Also
Next step: resident director rules
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