The Signature That Travels: When a Routine Board Resolution Becomes an Indian Tax Notice

A board member in Chicago signs a resolution. It authorizes an intercompany supply arrangement between the US parent and its Indian subsidiary. It is the eighth item on a consent agenda, approved in four minutes, filed and forgotten. Eighteen months later, a demand notice from a Maharashtra tax office names that individual personally, alongside two India-resident officers, on the premise that he was in charge of the affairs of the company when the liability crystallized. He has never set foot in India. His signature is in the file.

That sequence is not hypothetical. It is the predictable output of a legal architecture most US boards have never mapped.

Fiduciary duty and statutory liability are different animals

American directors are trained to think about personal exposure through a single lens: fiduciary duty. Breach the duty of care or loyalty, and Delaware, or the state of incorporation, supplies a framework of exculpation, indemnification, and D&O coverage. The Indian layer operates on an entirely separate theory. It does not ask whether you were careless with shareholders' money. It asks whether you were, as a matter of fact, a person in charge of a business that owed money to the exchequer.

Four statutory pathways matter, and they are cumulative rather than alternative.

Officer liability on unpaid tax. Under the GST framework, when a company is wound up or is being assessed for unpaid dues, every person who was a director during the period for which the tax remains unpaid can be held jointly and severally liable. The statute offers a defense, but the defense is narrow and evidentiary: the individual must show that the non-recovery was not attributable to his negligence. Note what that does. It converts the question from 'did you commit an offence' to 'can you produce records proving you were paying attention.' A director with no minutes, no certificates, and no paper trail of inquiry has no answer.

Penalty on the beneficiary. A separate provision targets any person who retains the benefit of a transaction in respect of which tax has not been paid. Enforcement officers have grown comfortable invoking this against parties who received goods or value from a defaulting supply chain. Where a US parent has been the recipient of an underpriced intercompany transfer, this is the provision to watch.

Criminal prosecution. GST and legacy excise statutes both create offences by companies and extend them to persons in charge of, and responsible for, the conduct of the business at the time of the offence. The conventional defense is the nominee-director argument: I held a seat, I exercised no function. Indian courts have generally been unimpressed where the record shows the individual signed commercial documents, approved pricing, or controlled funds. Authority follows facts, not designations.

Provisional attachment. Bank accounts, including those of individuals, may be provisionally attached during investigation. Attachment is not a finding of guilt. It is a liquidity event that arrives without a trial.

Where US executives actually get pulled in

The exposure is rarely created deliberately. It accumulates through administrative convenience.

• Portal credentials. GST filings require an authorized signatory with a verified identity. Foreign executives are often added 'just to keep oversight' and quietly become the individual whose credential validated a return that understated output tax.
• Additional directorships. Local incorporation formalities sometimes require a second director. A US CFO is named, signs the consent, and remains on the register years after the operational role ended.
• Board resolutions approving pricing. Transfer pricing and intercompany agreements are frequently approved at parent level. Those approvals become exhibits in an Indian proceeding about whether invoices reflected fair value.
• Bank mandates. Signatory authority over the Indian subsidiary's accounts is a strong indicator of control.

The resignation problem

There is a persistent belief that stepping down extinguishes exposure. It does not. Liability attaches to the period during which the individual held office. A resignation filed in 2026 provides no protection against an assessment covering 2022 through 2025. Worse, an unrecorded resignation — one lodged with the company but never reflected in the statutory register or on the tax portal — leaves the individual formally in place for years after they believe they left.

Governance that actually holds up

None of this requires US boards to disengage from India. It requires them to stop confusing oversight with signature authority.

Separate the two. The people who review India should not be the people who sign for India. Where possible, keep the primary authorized signatory designation with a resident Indian officer holding a formal power of attorney and a documented mandate.

Write down what you withheld. Board minutes that expressly reserve Indian tax filings to local management, and a delegation matrix that says so, are the raw material of a negligence defense. Silence is not neutral.

Demand a quarterly tax certificate. A short attestation from the Indian entity's finance head or statutory auditor — covering filing status, open demands, notices received, and unresolved credits — converts an argument about memory into an argument about documents.

Record the questions you asked. Directors who receive an adverse certificate and minute their follow-up questions are building the record they will need later. Directors who receive it and move to the next agenda item are not.

Audit the insurance. Confirm that the D&O program names the Indian subsidiary and its non-US-resident directors, and be realistic: statutory fines and penalties are generally uninsurable. Defense costs are the meaningful coverage line.

Treat exit as a project. Resignation letters, statutory filings, portal access revocation, and confirmations from local counsel should be sequenced and archived. An indemnity from a subsidiary that has no funds is a document, not a remedy.

The uncomfortable conclusion

The Indian enforcement posture has shifted from pursuing companies to pursuing the people who controlled them, and the tools available are broad enough that a determination of 'who was in charge' will be made on whatever record exists. For a US board, the practical question is not whether personal liability is fair. It is whether the file would show that anyone was watching.