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Security Clearance Requirement for DIN

Jul 11, 2022 20 comment

Impact of MCA Notification regarding Security Clearance Requirement from the Home Ministry for the person seeking appointment who is a national of country that shares a land border with India.

MCA through notifications tightened the norms for the appointment of any person, as director in an Indian Company, who is a national of a country that shares a land border with India. Accordingly,

1. In case the person already having DIN and seeking appointment is a national of a country that shares a land border with India, necessary security clearance from the Ministry of Home Affairs, the Government of India shall also be attached along with the consent.

No application number shall be generated in case of the person applying for the 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.

Two different notifications issued in this regard as follows:-

1. MCA notification no. 389 dated 1^st June, 2022 for the Companies (Appointment and Qualification of Directors) Amendment Rules, 2022 (Applicable from 1^st June, 2022)

1.   Insertion of proviso in Rule 8 of the Companies (Appointment and Qualification of Directors) Amendment Rules, 2022
2. Insertion of proviso in Rule 10(1) of the Companies (Appointment and Qualification of Directors) Amendment Rules, 2022
3. In Annexure of the Companies (Appointment and Qualification of Directors) Amendment Rules, 2022 insertion of paragraph (ii) in for DIR-2
4. In Annexure of the Companies (Appointment and Qualification of Directors) Amendment Rules, 2022 insertion of 3A in Form No. DIR-3. 

         2. MCA notification no. 346 dated 20^th May, 2022 for the Companies (Incorporation) Rules,                           2014(Applicable from 1^st June, 2022)

1. Addition of Declaration in FORM No.INC-32 (SPICe+), in Part-B.

 Accordingly from 1st June, 2022

1. In rule 8 (Consent to act as a Director), after the proviso, the following proviso shall be inserted, namely:-

“Provided further that in case the person seeking appointment is a national of a country which shares land border with India, necessary security clearance from the Ministry of Home Affairs, Government of India shall also be attached along with the consent.”

Resultantly in the Annexure of DIR-2 one more declaration is required to be added in this regard from 1^st June 2022 as follows:-

“(ii) I further declare that -

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. ”;

  2. In rule 10, (Allotment of DIN) in sub-rule (1), the following proviso shall be inserted, namely:

“Provided that 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 along with application for Director Identification Number.”

Resultantly In E- Form DIR-3 serial no. 3A was added under the heading verification as follows: -

“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; or

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 director identification number and the same has been obtained and is attached.

; and”.

        3.In FORM No.INC-32 (SPICe+), in Part-B, in Declaration, the following shall be inserted at the end,             namely:-

“I, on behalf of the proposed directors, hereby declare that person seeking appointment is a national of a country which shares a land border with India, necessary security clearance from Ministry of Home Affairs, Government of India shall be attached with the consent. O Yes O No. (if yes is opted, a copy of the security clearance is to be attached)”.

The above changes will certainly impact management of existing wholly owned subsidiaries of investors from bordering nations and also create uncertainty regarding re-appointment of Foreign Nationals from these Jurisdictions after expiry of their terms as Directors.