Companies (Appointment and Qualification of Directors) Amendment Rules, 2022
Companies (Appointment and Qualification of Directors) Amendment Rules, 2022
The Ministry of Corporate Affairs (MCA) vide a notification dated 1st June 2022 has issued the Companies (Appointment and Qualification of Directors) Amendment Rules, 2022 to further amend the Companies (Appointment and Qualification of Directors) Rules, 2014. According to this rule, citizens from the national of a country that shares a land border with India need security clearance from the government before they are appointed as directors on boards of Indian companies. It is important to note that the amendment rules are made effective from 1st June 2022.
Know more about the Companies (Prospectus and Allotment of Securities) Amendment Rules, 2022
Synopsis of Companies (Appointment and Qualification of Directors) Amendment Rules, 2022
If any person who is a national of a country that shares a land border with India (i.e. China, Bangladesh, Pakistan, Bhutan, Nepal, Myanmar, and Afghanistan), seeking an appointment in any Indian Company, shall on or before his/her appointment shall obtain and attach necessary security clearance from the Ministry of Home Affairs, Government of India along with his/her consent in writing to act as such in Form DIR-2.
Importance of Companies (Appointment and Qualification of Directors) Amendment Rules, 2022
In 2020, the government had placed all FDI from border countries under the approval route to curb opportunistic takeovers during the pandemic. These new Amendment Rules, 2022 were largely aimed at preventing Chinese investors from taking control of Indian companies.
Amendment in Rule 8 – Consent to Act as Director
MCA has inserted a new proviso in the sub-rule (1) of Rule 8 of Companies (Appointment and Qualification of Directors) Rules, 2014 vide the Amendment Rules, 2022
- Every person who has been appointed to hold the office of a director needs to furnish a consent in writing to act as Director in Form DIR-2 to the company on or before the appointment
- The company will have to file such consent with the Registrar in Form DIR-12 along with the fee as provided in the Companies (Registration Offices and Fees) Rules, 2014, within 30 days of the appointment of a director
As per the Companies (Appointment and Qualification of Directors) Amendment Rules, 2022, in case the person seeking appointment is a national of a country that shares a land border with India, necessary security clearance from the Ministry of Home Affairs, Government of India shall also be attached along with the consent.
Amendment in Rule 10 – Allotment of DIN
As per the Companies (Appointment and Qualification of Directors) Rules, 2014, to obtain the Director Identification Number (DIN), the company needs to file Form DIR-3 on the MCA portal and have to pay the requisite amount of fees through online mode. On successful payment of the Form, an application number shall be generated by the system automatically.
Now, MCA stated that no application number shall be generated in case of the person applying for a Director Identification Number 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 Director Identification Number.
Note: Before security clearance from the Ministry of Home Affairs, the Government of India is compulsory to obtain a DIN by any person who is a national of a country that shares a land border with India.
Amendment in Declaration Details of Form DIR-2 & DIR-3
According to Companies (Appointment and Qualification of Directors) Amendment Rules, 2022, a person appointed as director of a company will have to submit the following declaration:
- I am not required to obtain a security clearance from the Ministry of Home Affairs, Government of India before seeking appointments as a director
- I am required to obtain a security clearance from the Ministry of Home Affairs, Government of India before seeking appointments as director, and the same has been obtained and attached
Amendment in Declaration Details of Form DIR-3
To obtain the DIN from the Ministry, the director will have to provide the following declaration:
- I am not required to obtain a security clearance from the Ministry of Home Affairs, Government of India under sub-rule (1) of rule 10 before applying for the director identification number
- I am required to obtain the security clearance from the Ministry of Home Affairs, Government of India under sub-rule (1) of rule 10 before applying for a director identification number, and the same has been obtained and is attached
According to the new rules, it will be mandatory for companies to seek clearance from the government before appointing directors from land-border sharing nations on their boards.
The official Notification of MCA is attached here for reference:
companies-appointment-and-qualification-of-directors-amendment-rules-2022You can do a Company or DIN search through IndiaFilings.
