A UK company founder or director doesn’t have to move to India to run a company there. With the use of online banking, digital documents, video meetings, and the MCA’s system for filing documents over the internet, a lot of the required management and compliance activities can be done in the UK.
That said, management from the UK does not mean an Indian company can completely disregard the laws of India. The Company Act, tax laws, employment rules, accounting requirements, and other regulations still apply to the Company.
For directors in the UK managing an Indian company, the most important thing to have is the right supporting structure, proper local support, and ensuring that all the statutory obligations are met on time.
Can a UK Director Manage an Indian Company From the UK?
Yes. Foreign nationals can be directors of Indian companies. They only need to meet the legal requirements to be appointed as a director of an Indian company. A director being based in the UK should not cause Indian companies any issues with director management.
The Companies Act, 2013 gives the board the flexibility to allow directors to attend certain board meetings through electronic means such as video conferencing, so long as specific laws and restrictions allow it. The UK-based director is therefore in a position to attend meetings and make important decisions without having to travel to India for every board meeting.
However, proper corporate governance principles need to be established in order for remote management to be effective. All necessary notifications, agendas, minutes, resolutions and reports should be duly maintained and filed.
Resident Director Requirement in India
A big problem for foreign-owned Indian companies is the resident director requirement.
Every Indian company under Section 149(3) of the Companies Act, 2013 must have at least one resident director, meaning a director whom the company appoints must stay in India for a minimum of 182 days in a financial year. For a newly incorporated company, this requirement must be fulfilled in the relevant financial year in the proportionate manner.
This therefore would mean a UK director residing in Britain would not be considered a resident director for compliance purposes for an Indian company merely by taking the office of a director.
The company may need to appoint another resident director to meet the requirement, but the UK director may continue to be actively managing the company in respect of strategy and finance, as well as business development, and overall management.
How UK Directors Can Manage an Indian Company Remotely
1. Join Board Meetings Remotely
Board meetings are some of the easiest processes to manage from a remote work perspective. Directors can attend and be recorded in meetings via video conferencing technology.
A UK director should receive meeting notices and associated materials at least 1 working day prior to the meeting to allow them to review the meeting minutes and resolutions afterwards.
The company should assess whether there are any limitations on participation through video conferences for this particular board meeting.
2. Manage MCA Compliances Electronically
A large number of corporate actions and filings can be completed electronically at the Ministry of Corporate Affairs website.
A foreign director may also require a DIN if he is a proposed director and if certain corporate actions and filings are to be done, in which case he may also require a DSC along with a DIN. MCA guidance and articles state that for initiating director-related actions and filings, a DIN is required for foreign directors, and in such cases the director should provide a copy of his/her passport.
Director-related actions and filings often also require DSC along with certain forms. MCA’s DIR-3-KYC instructions require online submission and DSC along with certain supporting documents.
This enables many compliance-related activities to be coordinated with the UK director not present in India.
3. Keep up with Accounting and Tax Issues
A UK director should not consider accounting and tax as purely administrative issues.
The director should review at regular intervals:
- Financial statements
- Cash flow position
- Amounts due/unpaid taxes
- Compliance with Goods and Services Tax (GST) obligations
- Payroll requirements
- Tax Audit
- Payment to vendors
- Transactions with related parties
- Annual statutory reports
A qualified Indian Chartered Accountant or tax professional can be engaged to perform routine compliance. However, the director should continue to retain responsibility and oversight of this compliance.
This arrangement allows the director to run the Indian business from the UK, without the director having to concern himself with the finer details of Indian incorporation procedures.
4. Use Local Professional Support
Remote management is much easier when the company has local professionals in India.
Depending on the business, support may include:
- Company Secretary services
- Chartered Accountant services
- Payroll support
- Tax compliance
- HR administration
- Legal assistance
- Bookkeeping
- Support at the Registered Office
- Corporate compliance
The UK director is able to continue taking a strategic view of the business, while local professionals take care of the day-to-day statutory and administrative tasks.
Managing Employees and Daily Operations From the UK
A UK director may manage Indian employees through digital means, such as project management platforms and reports.
That said, management operations must conform to Indian standards. All things related to employment, such as contracts, disbursement, leave records, payroll, and statutory dues, as well as workplace policies, must be examined by someone knowledgeable in Indian employment laws.
Additionally, having an operations manager based in India can help lessen the burden on the UK leadership team, as the operations manager can help with the daily operations in India.
When a reporting structure is clearly defined, especially in cases when the director and employees are in different countries and time zones, things are made a lot simpler and operate more efficiently.
Banking and Financial Controls
Another layer of complexity of remote management is the financial aspect.
UK directors must create rules around:
- payment approvals for banks
- contract approvals for vendors
- reimbursement approvals for employees
- purchase approvals for major transactions
- loan approvals
- investment approvals
- related-party payments
- approvals for foreign exchange transactions
Remote banking might facilitate real-time monitoring of day-to-day transactions, but management should create controls around access. Directors should not approve of one person having total financial access without proper oversight and an approval process.
For transactions that involve cross-border payments, the Company should also consider the applicable foreign exchange and tax implications.
Does a UK Director Need to Visit India?
Not applicable to all routing management activities.
A UK director is likely able to participate remotely in many Board and management activities; however, many key business activities will necessitate travel, for example, meeting with investors, customers, staff, bank managers, or business partners.
How often travel will be needed depends on the type of business activities, what documentation is required, and the terms of the business transactions.
It is important that a distinction be made between activities that can be done remotely and those that cannot and require either a physical presence, legal assistance, or professional services.
Common Mistakes UK Directors Should Avoid
UK directors must look out for the following issues:
- Failing to appoint a resident director.
- Not meeting MCA filing deadlines.
- Considering India and UK tax compliance as one and the same.
- Approving transactions without compliance with applicable Indian laws.
- Delegating unrestricted financial powers to a single employee.
- Not keeping Board minutes and maintaining corporate records.
- Assuming that the company’s management is carried out from abroad, compliance with India would cease to exist.
- Not considering cross-border taxes and other currency exchange implications.
All of the above may result in financial and regulatory issues for both the company and its directors that could have easily been avoided.
A Practical Remote Management Model
The following is a typical structure for a UK-owned Indian company:
UK-Based Director/Founder: Overall decision-making and oversight
India-Based Resident Director: Taking care of the local statutory requirements and Board responsibilities
Indian Chartered Accountants/Company Secretaries/Legal Professionals: Handling Tax, accounting, and compliance
India Operations Team: Staffing, Clientele, Vendors, Activities
This structure is intended to give the Indian Company the requisite local support while allowing the UK leadership control of the Indian Company.
How VenturEasy Can Help
Building an Indian company from the UK involves setting up the legal structure and compliance systems. Once this is done, managing the company has a straightforward procedure.
We can help UK entrepreneurs and companies incorporate Indian companies, provide resident directors, accounting, tax, payroll, annual reporting, and other necessary services.
For people managing an Indian company from the UK, the right local support enables you to avoid dealing with administration headache, so you can focus on company growth.
To manage your Indian company from the UK, reach out to us. We provide company compliance, accounting, taxation, payroll and ongoing India company support to our clients.
Conclusion
UK directors can control Indian subsidiaries without physically being present in India. Management across borders has been made easier due to digital filings and online financial systems. Video conferencing and local support have made cross-border management easier.
The biggest challenge is meeting corporate requirements of India, especially the requirement of resident directors.
The right Indian team and clear management structure will give UK directors the ability to run an Indian company while staying in the UK.
FAQs
1. What should a UK startup outsource when expanding to India?
A UK Startup Expanding to India has the option to outsource Accounting, Bookkeeping, Payroll, Recruitment, HR Administration, Legal and Compliance, IT, customer service, Digital Marketing, and other Back-Office tasks. The ideal functions would depend on the Startup’s size, business model, and Indian operations.
2. Is outsourcing accounting useful for UK startups in India?
Yes. Accounting and Bookkeeping services in India can assist UK startups with the upkeep and management of their financial records and records of invoices and expenses, as well as their tax-related work and reporting. Local professionals can assist the business with understanding the specifics of accounting in India.
3. Can a UK startup outsource payroll in India?
Yes. Payroll outsourcing in India can assist with the processing of salaries, generation of payslips, calculations of taxes within the salary (TDS), and the maintenance of employee records and other requirements of a Payroll. A reputable local service provider can assist with reducing the administrative burden and the incidence of errors in Payroll.
4. Should UK startups outsource legal and compliance work in India?
UK startups would benefit from engaging qualified Indian professionals for Legal and Compliance support in India. Local professionals would assist with company filings, tax registrations, employment-related matters, as well as other compliance requirements in India. Outsourcing the work still retains on the company the responsibility for compliance.
5. Is IT outsourcing in India suitable for UK startups?
Yes. IT outsourcing in India can help Startups with access to Software Developers, Testers, Technical Support, as well as other IT professionals. Before outsourcing, Startups should protect their Intellectual Property, confidential information, and business data through appropriate contracts and provide adequate protection.
6. Is outsourcing better than hiring an in-house team in India?
It’s case-dependent. If your startup is in the early stages, outsourcing can buy you flexibility and access to experts your in-house team might not have. As your operations and employees begin to grow, an in-house Indian team might become more viable. A lot of startups can get by with the hybrid approach for a while.