Security Clearance Requirement for Directors from Land-Bordering Countries in India
Since 1st June 2022, any individual who is a national of a country sharing a land border with India, China, Bangladesh, Pakistan, Bhutan, Nepal, Myanmar, or Afghanistan must obtain security clearance from the Ministry of Home Affairs (MHA) before being appointed as a director of an Indian company and before being allotted a Director Identification Number (DIN). This requirement remains in force and applies to every such appointment today, not only to appointments made at the time the rule was introduced.
This requirement was introduced by the Companies (Appointment and Qualification of Directors) Amendment Rules, 2022 (Notification No. G.S.R. 410(E), dated 1st June 2022), issued by the Ministry of Corporate Affairs (MCA) to amend the Companies (Appointment and Qualification of Directors) Rules, 2014. It extends the protectionist approach first introduced by Press Note 3 of 2020, which restricted FDI from land-bordering countries to cover director appointments as well, regardless of whether the appointment involves any direct investment.
What the Rule Requires
The Amendment Rules made three specific changes to the Companies (Appointment and Qualification of Directors) Rules, 2014:
- A new proviso inserted in Rule 8 requires a person seeking appointment as director, who is a national of a land-bordering country, to attach necessary security clearance from the MHA along with their written consent to act as director (Form DIR-2).
- A new proviso inserted in Rule 10(1) provides that no DIN application number will be generated for an applicant who is a national of a land-bordering country, unless the necessary MHA security clearance is attached with the DIN application (Form DIR-3).
- A new declaration was inserted in Form DIR-12, to be completed by any person seeking appointment as a director who is a national of a land-bordering country, confirming whether the required MHA security clearance has been obtained.
Who This Affects
If you are a foreign national from a land-bordering country seeking a directorship in an Indian company, you must obtain MHA security clearance before applying for a DIN and before your consent to act as director can be validly filed. This applies regardless of the size of the company, the nature of your role, or whether any FDI is involved in the appointment itself.
If you are an Indian company appointing a director who falls into this category: you are responsible for ensuring the security clearance is obtained and properly attached to the relevant DIR forms before proceeding with the appointment. Filing without the required clearance risks rejection of the DIN application or the consent filing, and can delay the appointment indefinitely while clearance is pursued retroactively.
Practical Steps for Compliance
- Confirm whether the prospective director is a national of China, Bangladesh, Pakistan, Bhutan, Nepal, Myanmar, or Afghanistan.
- If so, initiate the application for MHA security clearance before proceeding with DIN application or filing of consent. Clearance timelines can be lengthy and should not be left until late in the appointment process.
- Attach the security clearance to the DIN application (Form DIR-3) and to the director’s written consent (Form DIR-2).
- Complete the declaration in Form DIR-12 confirming the clearance status when filing the appointment with the Registrar of Companies.
- Retain documentation of the clearance, since it may be requested during regulatory review of the appointment.
Related Compliance Areas
This rule sits alongside other restrictions India has introduced for entities and individuals connected to land-bordering countries. See our coverage of the Press Note 3 amendment governing FDI approval requirements for land-bordering country investment, which operates on a related but distinct basis from the director appointment requirement covered here. For a different DIN-related compliance matter, see our insight on DIN disqualification de-flagging and fee relaxation.
How MBG Can Help
Appointing a director from a land-bordering country, or structuring a board where this requirement applies, adds a compliance step that can materially affect appointment timelines if not planned for in advance. MBG’s corporate secretarial services support companies through the full director appointment process, including DIN applications, DIR form filings, and coordination of the security clearance requirement where applicable. For foreign-invested entities navigating both this requirement and broader entry compliance, our business setup in India team can advise on the complete structuring and governance picture from the outset.
Article contributed by:
Associate – Legal