Govt. Clearance is must for appointment as directors in Indian Companies

[CSLalit Rajput]

Govt. Clearance is must for appointment as directors in Indian Companies  

Ministry of Corporate Affairs (MCA) vide Gazette Id no. CG-DL-E-01062022-236214 & F.No.1/22/2013-CL-V dated 01^st June, 2022 has issued “the Companies (Appointment and Qualification of Directors) Amendment Rules, 2022” further to amend the Companies (Appointment and Qualification of Directors) Rules, 2014, in exercise of the powers conferred under second proviso to Section 149(1), 149 (4), 149 (6) (f), Section 150 (3), Section 150 (4),   Section 151, Section 152 (5), Section 153, Section 154, Section 157, Section 160, Section 168 (1) and section 170 read with section 469 of the Companies Act, 2013.

17. Applicability:

from the date of their publication in the Official Gazette i.e. 01.06.2022.

17. Key Highlights:

1. From the date of applicability of this circular, any national from a country that shares a land border with our Country, India, must seek security clearance from the Ministry of Home Affairs, Government of India if they wants to get appointed as Director in any Indian Company.

2. This requirement is in line with the Press Note 3 (2020 series) issues by Ministry of Commerce & Industry, Department for Promotion of Industry and Internal Trade, FDI Policy Section regarding “Review of Foreign Direct Investment (FDI) policy for curbing opportunistic takeovers/acquisitions of Indian companies due to the current COVID-19 pandemic”. (Circular Link: Click Here)

3. Countries which share land borders with India are:

• China,
• Bangladesh,
• Pakistan,
• Bhutan,
• Nepal,
• Myanmar and
• Afghanistan.

4. This steps is a preventive measure / prudent Step which aims to restrict the backdoor entry of Chinese companies or investors (including their subsidiaries) into India.

5. No application number shall be generated in case of the person applying for Director Identification Number is a national of a country which shares land border with India, unless necessary security clearance from the Ministry of Home Affairs, Government of India has been attached alongwith application for Director Identification Number.”

6. The directors are required to sign a declaration and verification as stated in the circular issues by the MCA ensuring that stated approvals are duly in place.

7. In form DIR -3: Serial No. 3A inserted:

3A. I am not 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 director identification number;

Kindly Note: The principal rules were published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) vide notification number G.S.R. 259(E), dated the 31st March, 2014 and were last amended, vide notification number G.S.R. 579(E), dated the 19th August, 2021.

Source: Click Here