"We'll just put our CFO on the board": What the Companies Act and FEMA actually require of directors in your Indian subsidiary

Most foreign groups treat the board of their Indian subsidiary as an administrative detail — two names from head office, signatures collected over email, done. Then incorporation stalls, because India requires at least one director who physically stays in the country for 182 days a year, and nobody at head office does. Or worse: the company is incorporated with a local "nominee" arranged by a service provider, and eighteen months later that person is the one the tax department names in a prosecution notice.

Board composition is one of the few India-entry decisions that is simultaneously a corporate law requirement, an immigration question, a FEMA question, and a personal liability question. Getting it wrong is cheap to fix on day one and expensive to fix on day five hundred.

What the regulation actually says

Minimum numbers — Section 149(1), Companies Act 2013. A private limited company (the standard wholly owned subsidiary vehicle) needs a minimum of two directors; a public company needs three; a One Person Company needs one. Maximum fifteen, and more than that requires a special resolution. Note the distinction Indian law draws and foreign founders often miss: directors must be individuals (Section 149 read with Section 152), so your foreign parent company cannot itself sit on the board. It can only nominate natural persons. Shareholders can be corporate; directors cannot.

The resident director — Section 149(3). This is the provision that derails timelines. Every company must have at least one director "who has stayed in India for a total period of not less than one hundred and eighty-two days during the financial year." For a newly incorporated company, the proviso applies the requirement proportionately from the date of incorporation to the end of that financial year.

Three points that are routinely misread:

• The test is residence in fact, not citizenship. A US or Singapore passport holder who genuinely spends 182+ days in India in the financial year satisfies Section 149(3). Conversely, an Indian citizen living in London does not.
• The count is by financial year (1 April to 31 March), not calendar year.
• It is a continuing obligation. Companies that satisfy it at incorporation and then quietly let the resident director relocate are in default from that financial year onward, even though no filing flags it.

DIN — Section 153 and Rule 9, Companies (Appointment and Qualification of Directors) Rules 2014. No person can be appointed a director without a Director Identification Number. At incorporation, the SPICe+ form allows DIN allotment for up to three proposed first directors as part of the incorporation application itself — which is why you want your board settled before you file, not after. Subsequent appointments require a standalone Form DIR-3.

For a foreign national, the DIN application documentation is where timelines actually go. The Ministry of Corporate Affairs requires identity and address proof that is:

• Apostilled, where the applicant's country is a signatory to the Hague Apostille Convention 1961; or
• Notarised and consularised (attested by the Indian embassy or consulate), where it is not.

Passport is mandatory for foreign nationals. Address proof must generally be recent — typically not older than one year for foreign applicants. Documents in a language other than English need a certified translation. Budget two to three weeks for apostille and courier alone; in practice this, not the MCA's processing, is the critical path.

Appointment mechanics. Before appointment, the individual furnishes consent in Form DIR-2 along with a declaration of non-disqualification under Section 164. The company then files Form DIR-12 with the Registrar of Companies within 30 days of the appointment, resignation or change. A resigning director may additionally file Form DIR-11 in their own name under Rule 16 — worth doing, because it is the director's own record that they left.

Annual DIN KYC. Every DIN holder must file DIR-3 KYC (or the web-based confirmation, where no details have changed) by 30 September each year. Miss it and the DIN is deactivated — which means that person cannot validly sign filings — and reactivation carries a ₹5,000 fee. Foreign directors miss this more than anyone, because nothing in their home jurisdiction resembles it.

Where FEMA enters. Appointing a foreign national to the board of an Indian company is not itself a capital account transaction and does not need FDI approval or reporting. FEMA becomes relevant in three specific ways:

• Payments to non-resident directors. Directors' sitting fees, commission and remuneration paid to a non-resident are current account transactions, governed by the Foreign Exchange Management (Current Account Transactions) Rules 2000. Remittance of sitting fees and commission is permissible through your AD Category-I bank on production of the board/shareholder resolution and Form 15CA/15CB tax certification, within the limits Indian company law itself imposes on managerial remuneration.
• Equity held by a director who is also an investor. If a foreign director subscribes to shares in their personal capacity, that is FDI in the ordinary way — and following the FEMA (Non-Debt Instruments) Third Amendment Rules 2026, a foreign individual investing directly is now squarely contemplated. The allotment still requires Form FC-GPR filing on the RBI FIRMS portal within 30 days of allotment, with a valuation report where applicable.
• A resident director who is a non-resident Indian. If your "resident director" is an NRI or OCI whose India presence is seasonal, test Section 149(3) on days actually spent, not on passport or PIO status.

Immigration is a separate gate. A foreign director who merely attends board meetings can generally do so on a business visa, and Rule 3 of the Companies (Meetings of Board and its Powers) Rules 2014 permits attendance by video conferencing for most business — which is how most foreign-parent nominees participate. But a foreign director who works in India and draws salary from the Indian company needs an employment visa, which carries a minimum annual salary threshold (commonly cited as US$25,000, with defined exemptions). Companies that put a foreign national on the board as a working managing director on a business visa are exposed on immigration independent of anything the Companies Act says.

Practical implications — what happens if you get this wrong

No resident director. Incorporation simply will not complete. Post-incorporation loss of the resident director is a Section 149(3) contravention, attracting penalty under Section 172 (which applies where no specific penalty is prescribed) on the company and every officer in default, computed per day of default. It also tends to surface at the worst moment — during due diligence in a funding round or a sale.

The nominee director problem. This is the exposure foreign groups understand least. Indian law does not have a light-touch "nominee" category. A director introduced by a service provider to satisfy Section 149(3) is a director, full stop, and falls within "officer who is in default" under Section 2(60). That means:

• Personal liability for the company's failure to file financial statements and annual returns (Sections 137 and 92), and disqualification for five years under Section 164(2) if the company defaults for three consecutive financial years.
• Exposure as "principal officer" in TDS prosecutions under Section 276B of the Income-tax Act 1961, and under Section 137 of the CGST Act 2017 for GST offences.
• Liability under Section 141 of the Negotiable Instruments Act 1881 for dishonoured cheques.
• Duties in their own right under Section 166, and interest disclosure in Form MBP-1 under Section 184.

The statutory shelter in Section 149(12) — which limits liability to acts that occurred with the director's knowledge, were attributable through board processes, and where the director failed to act diligently — is drafted for independent directors and non-executive directors who are not promoters or key managerial personnel. A parent-nominated non-executive director may fall within it; a nominee who is effectively the promoter group's representative and the only person signing things may find the argument harder than expected. Relying on it as a design assumption is a bad idea.

The practical failure mode is not fraud. It is a rented local director who stops responding, whose DIN then lapses for want of DIR-3 KYC, leaving the company unable to sign its own ROC filings.

Step-by-step: what to do

• Decide the board before you file SPICe+. Fix the two (or more) individuals, and identify which one will satisfy Section 149(3). Everything downstream depends on this.
• Solve the resident director honestly. Either relocate a group employee who will genuinely spend 182+ days in India, or appoint a senior local hire you actually control through employment. Prefer a person with accountability to the group over a name supplied by a filing agent.
• Start apostille/consularisation for every foreign director immediately. Passport plus current address proof, apostilled or embassy-attested, certified English translation where needed. This is the longest lead item.
• Collect DIR-2 consent and Section 164 non-disqualification declarations from each proposed director before appointment.
• Apply for DIN via SPICe+ for up to three first directors at incorporation; use DIR-3 for later appointments.
• Hold the first board meeting within 30 days of incorporation, and thereafter at least four meetings a year with no more than 120 days between consecutive meetings (Section 173). Record video-conference attendance properly.
• File DIR-12 within 30 days of any appointment, resignation or change in designation.
• Diarise 30 September for DIR-3 KYC for every DIN holder, including foreign directors. Own this centrally; do not leave it to individuals.
• Check the immigration position for any foreign director who will work in India or draw salary from the Indian entity — business visa is not employment authorisation.
• Route director payments through your AD bank with the underlying resolution and 15CA/15CB, treating them as current account transactions.
• Review Section 149(3) compliance each March, before the financial year closes, while there is still time to add days or appoint someone else.

FAQ

Can our foreign parent company be named as a director?
No. Section 149 read with Section 152 requires directors to be individuals. The parent can nominate natural persons to the board and remains the shareholder, but cannot sit on the board itself.

Does the resident director have to be an Indian citizen?
No. Section 149(3) is a physical-stay test — 182 days or more in India during the financial year. Citizenship and residency status are irrelevant to that section, though they matter for tax and immigration.

If we appoint a nominee director through a service provider, are we protected?
Not in the way most groups assume. That person carries real statutory liability as an officer in default, and the Section 149(12) shelter is narrow and designed for independent and non-promoter non-executive directors. The bigger practical risk is an unresponsive nominee with a deactivated DIN blocking your own filings.

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See Also

• "We'll just appoint our CFO in Singapore as director": what the Companies Act actually requires of an Indian subsidiary's board
• "We'll just use DCF": What FEMA actually requires for FDI valuation, and the pricing floor that blocks your allotment
• Any bank will do for your India subsidiary: What FEMA actually requires of your AD Category-I bank