Amendment of Companies Rules for Appointment and Qualification of Directors

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Amendment of Companies Rules for Appointment and Qualification of Directors

As per the Ministry of Corporate Affairs notification released on June 1st, 2022, the Central Government has made further rules to amend the Companies (Appointment and Qualification of Directors) Rules, 2014. These rules are now called the Companies (Appointment and Qualification of Directors) Amendment Rules, 2022. 

These rules came into force on the date of their publication in the Official Gazette. This amendment makes it mandatory for an individual who is a national citizen of a country that shares a land border with India (Pakistan, China, Bhutan, Bangladesh, Nepal, Myanmar and Afghanistan to seek security clearance from the Ministry of Home Affairs, Government of India.

The individual must attain security clearance before he/she applies for the Director Identification Number (DIN). The Director Identification Number is a unique identifier issued to the director of a to-be-registered company.

Amendments in Rule 8 - Consent

In Rule 8 of the Companies (Appointment and Qualification of Directors) Rules of 2014. The MCA (Ministry of Corporate Affairs) has inserted the following provision:

1. Every person must have consent to act as a Director of the company. He/she can furnish the consent in writing in Form DIR-2 to the company on or before the appointment.

2. The company must file the consent with the Registrar in Form DIR-12 with fee as provided in the Companies (Registration Offices and Fees) Rules, 2014. This must be filed within 30 days of appointing the director.

In case the person applying for a DIN is a national of a country which shares a land border with India. Taking the necessary security clearance from the Ministry of Home Affairs, the Government of India has been attached along with the consent.

Amendment in Rule 10 - Allotment of DIN

As per the 2014 rules, the company have to obtain a Director Identification Number (DIN). So, it can be obtained by filing Form DIR-3 on the MCA portal. With this, the fees must be paid through online mode. After the successful payment, an application number will be generated by the system automatically. 

However, after the implementation of the new amendment, MCA stated that no application number would be generated. In case the person applying for a DIN is a national of a country that shares a land border with India. This is unless necessary security clearance from the Ministry of Home Affairs, Government of India. This has been attached along with an application for a Director Identification Number.

Note: Before security clearance from the Ministry of Home Affairs, the Government of India is compulsory to obtain a DIN. This is 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

It is mandatory for any individual appointed as a director of a company to submit a declaration. This is according to the newly introduced Companies Amendment Rules, 2022.

• Do not need to acquire a security clearance from the Ministry of Home Affairs, Government of India to apply for a director's position.
• Only obtained a security clearance from the Ministry of Home Affairs, Government of India to be eligible for appointment as a director. And, attached it for reference.

Amendment in Declaration Details of Form  DIR-3

To get the DIN from the Ministry, the director has to provide the following declaration:

• Do not require to obtain a security clearance from the Ministry of Home Affairs, Government of India. This is under sub-rule (1) of rule 10 before applying for the director identification number.
• Required to obtain the security clearance from the Ministry of Home Affairs, Government of  India. This is also under sub-rule (1) of rule 10 before applying for a DIN. The same must be obtained and attached.

As per the new rules, companies must seek clearance from the government. Before appointing directors from land-border-sharing nations to their boards.

Conclusion

To conclude, both these amendments inform any individual who wants to apply for the Director Identification Number. Or, who is a national citizen of India’s border-sharing countries must get a security clearance from the Ministry of Home Affairs. After getting the required security clearance, he/she can apply for DIN registration. This is by attaching the security clearance certificate with the DIN application.

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