MCA clarifies on residency requirement of resident director

With the implementation of the pre-requisite to have at least one resident director, foreign companies doing business in India will now have a tough time ensuring the residency requirement 

The Ministry of Corporate Affairs (MCA) seems to be in top gear, issuing clarifications, circulars and notifications in response to the numerous queries and representations received from various stakeholders. In the case of directors, MCA clarified rules about Independent Directors a few days ago and now subsequent to examining the matter, MCA has issued clarifications on residency requirements.


Provisions under Companies Act, 2013

Section 149(3) of the Companies Act 2013 (Act, 2013) stipulates following requirement:


(3) Every company shall have at least one director who has stayed in India for a total period of not less than one hundred and eighty -two days in the previous calendar year.”


The section has been enforced with effect from 1 April 2014 and has led to confusion regarding the applicability of this provision in the current financial year/ calendar year. So, in order to eliminate any sort of confusion, MCA has come out with a clarification vide General Circular No 25/2014 dated 25 June 2014 ( ).


Previous Calendar Year - clarified

The applicability of section 149 (3) mandating the residency requirement for a total period of not less than 182 days in the previous calendar year shall commence from 1 April 2014. The period from 1st April 2014 till 31 December 2014 (Calendar Year 2014) will be period taken into consideration for ensuring compliance with previous calendar year. Accordingly, the number of days for which the director(s) need to be a resident in India, during the above mentioned period shall be computed proportionately (instead of 182 days) and in all cases shall exceed 136 days.


Position for recently incorporated companies

The MCA clarified that Companies incorporated between 1 April 2014 to 30 September 2014 should have a resident director either at the incorporation stage itself or within six months of their incorporation. Further, Companies incorporated after 30 September 2014 needs to have the resident director from the date of incorporation itself.


Impact of this provision on Companies

The residency requirement will ensure that the Board shall continue to monitor directly the management of the company on a regular basis and shall be responsible for acts and deeds of the company. The continued presence of at least one director will not delay statutory action steps and will be a step forward towards meeting the timely corporate compliance requirements. Moreover, this provision will mostly affect foreign companies intending to start businesses in India, earlier they used to typically appoint foreign directors as the directors of the Indian subsidiary because such a requirement was missing in the Act of 1956. The intention of the Section 149 (3) is not limited to incorporation, but at all times thereafter, in order to ensure that there will be at least one resident director in case any issue arises with regard to the accountability of the Board. With the implementation of this pre-requisite, foreign companies doing business in India will now have a tough time ensuring the same.


(Nikita Snehil works with Vinod Kothari & Co)



Cacscwacoach ShantanuPethe

12 months ago

what if company having a only one resident director resigns from the company.. is there any time lkimit within which new resident director should be appointed

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Food for Thought

Obesity is a serious health issue, but for the majority of Indians it is the lack of nutrition and food, enough to even survive, that is a pressing concern.

How I wish we could devise a new method for solving India’s problem of disappearing waistlines, while others worry about their bulging middles. The latter afflicts a minority in India, considering India has recently been found to be the leader in a competition of shrinking waistlines, along with some sub-Saharan African countries.

Bariatric surgery, coronary bypasses, etc, are ‘therapies’ for the rich. The poor, malnourished people are spared these health dangers; like the poor in the West who survived without bloodletting, purging and induced vomiting to get the humours out for 2500 years since the time of Hippocrates, because they could not pay the price the doctors then charged for these procedures.

Social schemes addressing the hunger problem in India are hobbling from one obstacle to another. A typical example that speaks about the hair-brained nature of these schemes comes from the state of Karnataka, where the (in)famous ‘one rupee a kilo’ rice for the poor has already run into a formidable roadblock. The traders’ union has gone on strike demanding higher commissions to distribute the cheap (unfit for consumption) rice for a rupee. Many traders are trying to obtain guaranteed sales contracts for their slow-moving items, like detergents, for a particular amount, as a precondition for distributing the cheap rice!

The scheme is expected to cost the Karnataka government a whopping sum of Rs4,300 crore; a heavy burden on their budget. India is not a rice surplus country and Karnataka might have to import rice to meet the demand if the scheme gets implemented. This is the story of just one state. Then there is the presence of rampant corruption in the set-up. We are also again at the top of the list of corrupt countries.

If one is sincere about improving the lot of India’s poor, who form half the world’s poor, one has to take some basic steps; provide three square meals a day for the poor, uncontaminated by animal and/or human excreta; provide clean water which is still a pipe dream for millions; provide a toilet for every house to avoid hookworms that eat away the little nutrition people get; and provide nutritious food for India’s pregnant women in the first trimester to avoid stillbirths and birth of babies with smaller than normal vital organs like the heart, blood vessels, hippocampus major and the pancreas. Congenital debilities make them prone to precocious heart diseases and other killers like diabetes. Thanks to the hippocampus major being small, these people cannot go up the educational ladder.

The greatest misfortune that could befall anyone is “not knowing where your next meal comes from.” Agrarian societies have suffered from this curse since the time the Yangtze Valley peasants worried about floods and pestilence. The husband in rural Indian households often spends a good part of his daily wages on country liquor. It falls upon the wife to feed herself and the children by scrounging together whatever little money she can manage. Poverty, goes the old adage, is the womb of all ills. “The poor pay for their poverty with their lives,” wrote Julian Tudor Hart, working in a poor mining community in Glyncorrwg, Wales, for half a century.

India’s most urgent problem is to get some food for the starving millions who suffer from NIDS (nutritional immune deficiency syndromes) and die like flies daily. When one looks at the whole country, the diseases of affluence cannot be our priority. The lower income group people often suffer from malnutrition due to eating the wrong foods, but the vast majority, the poorest of the poor, have sub-nutrition and shrinking waistlines which needs urgent treatment!

    “In a country well governed, poverty is something to be ashamed of. In a country badly governed, wealth is something to be ashamed of.” — Confucius

Professor Dr BM Hegde, a Padma Bhushan awardee in 2010, is an MD, PhD, FRCP (London, Edinburgh, Glasgow & Dublin), FACC and FAMS.



Narendra Doshi

2 years ago

Brief article contains a trunkload of points to think about and implement.

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