With the rise of globalisation and cross-border businesses, Indian professionals are increasingly participating in international corporate structures and frameworks. One of the most common questions that always arises is: Can an Indian director be appointed as a director in a foreign company?
The simple answer is yes; an Indian director can be a director in a foreign company. However, such types of appointments are subject to the various laws of the foreign country, Indian regulations and various foreign exchange compliance requirements. This blog will explain the legal framework, eligibility, compliance obligations and various key considerations in detail.
Understanding the Concept of Directorship
A director is an individual appointed to manage, operate and oversee the various affairs of a company. Directors are basically responsible for the strategic decisions, regulatory compliance and fiduciary duties toward the company and its various stakeholders.
In today’s global business environment, it is very common for companies to appoint directors from different countries to bring international expertise, governance standards, norms, and market knowledge.
Is It Legal for an Indian Director to Be a Director in a Foreign Company?
Yes, Indian law does not prohibit an Indian citizen or resident from becoming a director in a foreign company. There is no such restriction under the Companies Act, 2013, on holding directorships in foreign companies.
However, the appointment must comply with: –
- Laws of the foreign country where the company is incorporated
- Indian foreign exchange laws (FEMA)
- Tax and disclosure requirements in India
Applicable Indian Laws and Regulations
1. Companies Act, 2013
The Companies Act, 2013, governs directorships in Indian companies but does not restrict an Indian citizen from holding positions in foreign companies. The limits on the number of directorships (maximum 20) apply only to the Indian companies, not foreign entities.
2. Foreign Exchange Management Act (FEMA), 1999
FEMA plays a crucial role when: –
- The Indian director receives remuneration, commission or shares from the foreign company
- The appointment of director involves foreign investment or equity holding
Under FEMA: –
- Salary or director fees received from a foreign company must comply with RBI regulations
- Any shares or ESOPs allotted by a foreign company must be reported under Overseas Investment (ODI) or Liberalised Remittance Scheme (LRS), if applicable
3. Income Tax Act, 1961
Income earned by an Indian director from a foreign company may be: –
- Taxable in India if the director is a resident
- Subject to Double Taxation Avoidance Agreements (DTAA), if India has a tax treaty with the foreign country
Disclosure of foreign income and assets is mandatory in Indian income tax returns.
Eligibility of an Indian Director for a Foreign Company
An Indian individual can be appointed as a director in a foreign company if: –
- The person meets the director’s eligibility criteria under the foreign country’s laws
- Holds valid identification documents (passport, address proof, etc.)
- Meets residency or visa requirements (if physical presence is required)
- Is not disqualified under Indian or foreign corporate laws
Some countries require: –
- Local tax registration
- Business visa or work permit
- Police clearance or background verification
Do Indian Directors Need DIN for Foreign Companies?
A Director Identification Number (DIN) is mandatory only for directorships in Indian companies.
For foreign companies: –
- DIN is not required, unless the director is also serving on the board of an Indian company
- Foreign companies may have their own identification or registration process
Remuneration and Compensation from a Foreign Company
Indian directors may receive: –
- Director fees
- Salary
- Profit-based commission
- Equity shares or stock options
Key compliance points: –
- Remittance must follow FEMA and RBI guidelines
- Foreign income must be reported in Indian tax returns
- TDS or withholding tax may apply in the foreign country
Reporting and Disclosure Requirements in India
An Indian director holding a position in a foreign company must comply with the following: –
- Income Tax Disclosure
- Schedule FA (Foreign Assets) in ITR
- Reporting of foreign bank accounts, shares and income
- RBI Reporting (If Applicable)
- ODI filings if shares are held
- LRS compliance for overseas investments
- Corporate Disclosure
If the director is also a director in an Indian company, the foreign directorship must be disclosed: –
- In MBP-1 (Disclosure of Interest)
- In annual filings, where required
Advantages of Appointing an Indian Director in a Foreign Company
- Access to India market expertise
- Cost-effective leadership talent
- Global governance perspective
- Strengthened cross-border business strategy
- Compliance support for Indian operations
Key Challenges and Risks
While legally allowed, certain challenges exist: –
- Complex tax compliance
- Foreign exchange reporting
- Conflict of laws between jurisdictions
- Increased regulatory scrutiny
- Personal liability under foreign laws
It is advisable to seek professional legal and tax advice before accepting such appointments.
Can an Indian Resident Director Hold Multiple Foreign Directorships?
Yes, an Indian individual can hold multiple directorships in foreign companies, subject to: –
- Foreign country laws
- Time commitment and fiduciary responsibilities
- Disclosure and tax compliance in India
The 20-director limit under Indian law does not apply to foreign companies.
Conclusion
An Indian director can legally be a director in a foreign company, and such cross-border appointments are increasingly common in today’s globalised economy. While Indian law permits this, compliance with foreign corporate laws, FEMA regulations, RBI guidelines and Indian tax laws is essential.
Before accepting or offering a foreign directorship, both the individual and the company should ensure proper due diligence, documentation and ongoing compliance. With the right and accurate legal framework and professional guidance, serving as a director in a foreign company can be a valuable global opportunity for the purpose of Indian professionals. It not only enhances the international exposure but also strengthens or enhances the corporate governance, expands professional networks and supports global business growth when it is managed in accordance with applicable legal and regulatory requirements. In addition to that, it enables businesses to leverage diverse leadership perspectives, improve strategic decision-making and also ensure long-term sustainability in an increasingly interconnected global marketplace, while fostering key aspects such as compliance, transparency, resilience, innovation, competitiveness and responsible leadership.
