MCA notifies amendment in Companies Rules for Directors Appointment of Nations sharing land border with India

The Ministry of Corporate Affairs “MCA” vide its Notification No. G.S.R. 410(E) dated 01.06.2022 has notified amendment in Companies (Appointment and Qualification of Directors) Rules 2014 in order to straighten the norms for appointment of any person, as director in an Indian Company, who is a national of a country that shares a land border with India.

Key highlights related to the Amendment:

• As per the amendment, in case the person seeking appointment as a director in an Indian Company and is a national of a country that shares a land border with India, is required to obtain necessary security clearance from the Ministry of Home Affairs, the Government of India and the same shall be attached along with the consent.
• Further, no application number shall be generated in case of the person applying for the Director Identification Number (DIN) is a national of a country that shares a land border with India, unless necessary security clearance from the Ministry of Home Affairs, Government of India has been attached along with an application for DIN.
• The amendment also makes an insertion in Form DIR-2, wherein the director needs to declare one of the following declarations while filing Form DIR-2, i.e., consent to act as director:

• I am not required to obtain the security clearance from the Ministry of Home Affairs, Government of India before seeking appointment as director; or
• I am required to obtain the security clearance from the Ministry of Home Affairs, Government of India before seeking appointment as director and the same has been obtained and is attached.

• Further, MCA has also made the same insertion in Form DIR-3, in order to made the provisions of the said amendment applicable to the directors currently holding a valid DIN and their subsequent reappointment after expiry of their DIN.

Implication: This amendment will certainly impact management of existing wholly owned subsidiaries of investors bordering nations and also create uncertainty regarding reappointment of foreign nationals from these jurisdictions after expiry of their term

Syed Aman, Audit Associate, SW India