Foreign Company

Chapter – XXII – Companies Incorporated outside India read with Companies (Registration of Foreign Companies) Rules, 2014

Introduction:

If a person desires to do business in India, he can enter India either by way of establishing a place of business in India or he can form an independent company in India. This note covers relevant provision of the Companies Act, 2013 applicable for establishing a place of business in India and covers provision applicable to certain class of companies.

Definition’s:

Section 2(42) of the Companies Act, 2013 (“the Act”) defines foreign company (“FC”) as follows:

“Foreign Company” means any company or body corporate incorporated outside India which;

1. has a place of business in India whether by itself or through an agent, physically or through electronic mode; and
2. conducts any business activity in India in any other manner.

The expression “place of business” includes a share transfer or registration office as per sec. 386(c) of the Act.

“Electronic mode” means carrying out electronically based, whether main server is installed in India or not.

Applicable sec’s:

Sec. 379 – Applicability of Act to foreign Companies:

Where not less than 50% of the paid-up share capital, whether equity or preference or partly equity and partly preference, of a FC is held by

• one or more citizens of India or
• one or more companies or bodies corporate incorporated in India or
• one or more citizens of India and one or more companies or bodies corporate incorporated in India

Whether singly or in the aggregate,

such company shall comply with the provisions of this Chapter and such other provisions of this Act with regard to the business carried on by it in India as if it were a company incorporated in India.

Forms etc., to be delivered to registrar by FC carrying on business in India & procedure to be followed:

According to sec. 380, FC’s which establish a place of business in India shall, within 30 days of its establishment deliver to the registrar in Form FC – 1 and the application shall also be supported with an attested copy of approval from the Reserve Bank of India under Foreign Exchange Management Act or Regulations, and also from other regulators, if any, or a declaration from the authorised representative of such foreign company that no such approval is required for registration:

The following are the documents required:

1. a certified copy of the charter, statutes, or memorandum and articles, of the company or other instrument constituting or defining the constitution of the company; and if the instrument is not in the English language, a certified translation thereof;
2. the full address of the registered or principal office of the company;
3. a list of the directors and secretary of the company containing following particulars:
   • personal name and surname in full;
   • any former name or names and surname or surnames in full;
   • father’s name or mother’s name and spouse’s name;
   • date of birth;
   • residential address;
   • nationality;
   • if the present nationality is not the nationality of origin, his nationality of origin;
   • passport number, date of issue and country of issue; (if a person holds more than one passport then details of all passports to be given)
   • income-tax permanent account number (PAN), if applicable;
   • occupation, if any;
   • whether directorship in any other Indian company, DIN, name and CIN of the company in case of holding directorship;
   • other directorship or directorships held by him;
   • Membership Number (for Secretary only); and
   • e-mail ID
4. the name and address or the names and addresses of one or more persons resident in India authorised to accept on behalf of the company service of process and any notices or other documents required to be served on the company;
5. the full address of the office of the company in India which is deemed to be its principal place of business in India;
6. particulars of opening and closing of a place of business in India on earlier occasion or occasions;
7. declaration that none of the directors of the company or the authorised representative in India has ever been convicted or debarred from formation of companies and management in India or abroad;

FC already existing, not delivered the documents as per the Companies Act, 1956:

If FC existing at the commencement of this Act, if it has not delivered to the Registrar, the documents and particulars specified in sec. 592(1) of the Companies Act, 1956, continue to be subject to the obligation to deliver those documents and particulars in accordance with that Act.

Alteration in the documents:

Where any alteration is made or occurs in the documents delivered to the Registrar under this section, the foreign company shall, within thirty days of such alteration, deliver to the Registrar for registration, a return in Form FC – 2 containing the particulars of the alteration made or occurred.

Accounts of FC:

As per sec. 381

1. Every FC shall, in every calendar year,
   1. make out a balance sheet and profit and loss account of its Indian business operations in accordance with schedule III, containing the following particulars:
      • accounts of companies;
      • latest consolidated financial statements of the parent foreign company, as submitted by it to the prescribed authority in the country of its incorporation under the provisions of the law for the time being in force in that country;
        • Provided that where such documents are not in English language, there shall be annexed to it a certified translation thereof in the English language.
        • Provided further that where the Central Government has exempted or specified different documents for any foreign company or a class of foreign companies, then documents as specified shall be submitted;
2. deliver a copy of those documents to the Registrar,

• If any such document as is mentioned in sub-section (1) is not in the English language, there shall be annexed to it a certified translation thereof in the English language.
• Every FC shall send to the registrar along with the documents required to be delivered to him under sub-section (1), a copy of the following documents of all places of business established by the company in India as at the date with reference to which the balance sheet referred to in sub-section (1) is made out.
  • Statement of related party transaction, which includes name of the related person in India, nature of such relationship, description and nature of transaction, amount of such transaction during the year with opening, closing, highest and lowest balance during the year and provisions made (if any) in respect of such transactions, reason of such transaction, material effect of such transaction on both the parties, amount written off or written back in respect of dues from or to the related parties, a declaration that such transactions were carried out at arm’s length basis and any other details of the transaction necessary to understand the financial impact;

The above documents shall be delivered to the registrar within a period of six months of the close of the financial year of the FC to which the documents relates (Extension of 3 months can be granted by registrar by making an application).

Every FC shall get its accounts, pertaining to the Indian business operations audited by a practicing Chartered Accountant in India or a firm or limited liability partnership of practicing chartered accountants.

The provisions of Chapter X i.e., Audit and Auditors and rules made there under shall apply to the FC.

Every FC shall file with the registrar, along with the financial statement, in Form FC.3
a list of all the places of business established by the FC in India as on the date of balance sheet.

Display of name, etc., of FC – sec. 382:

Every FC shall conspicuously exhibit on the outside of every office or place where it carries on business in India, the name of the company and the country in which it is incorporated, in letters easily legible in English characters, and also in the characters of the language or one of the languages in general use in the locality in which the office or place is situate and to be stated in all business letters, etc., and in all notices, and other official publications of the company and

Service on foreign company – sec. 383:

Any process, notice, or other document required to be served on a FC shall be deemed to be sufficiently served, if addressed to any person whose name and address have been delivered to the Registrar under section 380 and left at, or sent by post to, the address which has been so delivered to the registrar or by electronic mode.

Debentures, annual return, registration of charges, books of account and their inspection – sec. 384:

The following provisions shall apply to the FC:

• The provision of sec. 71 relating to debentures.
• The provisions of sec. 92 relating to annual return and the form shall be prepared and filed, within a period of sixty days from the last day of its financial year, to the registrar in Form FC.4.
• The provision of sec. 128 relating to the extent of requiring it to keep books of accounts at its principle place of business in India, the books of accounts referred to in that section with respect to monies received and spent, sales and purchase made, and assets and liabilities, in the course of or in relation to its business in India.
• The provisions of chapter VI relating to charges on properties which are created or acquired by any FC.
• The provision of chapter XIV relating to Indian business of a FC as they apply to a FC incorporated in India.

All the documents which any FC is required to deliver to the registrar shall be delivered to the registrar having jurisdiction over New Delhi.

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Disclaimer: The entire contents of this document have been developed on the basis of relevant information and are purely the views of the authors. Though the authors have made utmost efforts to provide authentic information however, the authors and the company expressly disclaim all and any liability to any person who has read this document, or otherwise, in respect of anything, and of consequences of anything done, or omitted to be done by any such person in reliance upon the contents of this document.