Chapter 11 Companies Incorporated Outside India

Scope: Chapter XXII of the Companies Act As per 2(42) “Foreign company” means any company or body corporate
2013 -> Section 379 to 393A Including WHAT is a Foreign incorporated outside India which;
Companies (Registration of foreign Company? 2(42) A. has a place of business in India whether by itself or through an agent,
companies) Rules, 2014 physically or through electronic mode AND
B. conducts any business activity in India in any other manner

What do you mean by Electronic Mode? (Is what’s app Included? Is Email Included?) By Itself -> Physically -> KFC Own Stores
By Itself -> Electronically-> Amazon Directly selling here online.
According to the Companies (Registration of Foreign Companies) Rules, 2014,” Through Agent -> Physically -> KFC Franchise stores
Electronic Mode” means carrying out electronically (activities) based, whether main Through agent -> Electronically-> Sellers on Amazon.US selling
server is installed in India or not, including the following; in India

A. B2B and B2C, Data interchange and other digital supply transactions
(Data interchange examples include PO Raising, Claims for Insurance, payment Section 379 - Applicability of this chapter to foreign
remittances etc.) Companies

B. Offering to Accept deposits or Inviting Deposits or accepting deposits or

subscriptions in securities in India or from citizens of India
(Foreign Company accepting deposits from India) – ( In 2019, Apple issued FCCBs Section 380 to 386 + Few Foreign companies have to follow
worth $1 billion to qualified institutional investors in India, marking the first time they 392 + 396 are this chapter AND other chapters of the
raised funds directly in the Indian market) applicable to foreign companies Act as if it is a company
companies. I.e. All Incorporated in India IF;
C. Financial settlements, web based marketing, advisory and transactional services, companies satisfying
database services and products, supply chain management the definition of 2(42) Not less than 50% of the paid up share
(example : Meta Ads, BCG Consulting, Cloud server for database) shall follow the capital (Equity + Preference) of a
provisions in Chapter foreign company incorporated outside
D. online services such as telemarketing, telecommuting, telemedicine, XXII India is held by
education and information research
(Beg : Online Therapy, Online International courses)
A. One or more Citizens of India
B. By one or more companies or Body
E. all related data communication services whether by E-mail, Mobile devises, Social Media
corporates Incorporated In India
whether conducted by e-mail, mobile devices, social media, cloud computing, document
management, voice or data transmission or otherwise.
C. Combination of above
Note : Securities offered or Listing of securities in IFSC (sez) is not included as part of
the term electronic mode Chapter 11
 Chapter 11 Companies Incorporated Outside India
Section 380 – Documents to be Delivered to Registrar by Foreign Companies

Every foreign company shall within 30 days of establishment of Such Application (FC-1) shall be supported by an attested copy of approval
its place of business in India, deliver to the registrar the from RBI under FEMA Act and submit such application to the registrar having
following details for registration in form FC -1 jurisdiction of New Delhi.

Any alteration of the same shall also be filed in 30 days of such alteration in Note : Approval from authorised representative is also needed to establish a
form FC-2 place of business in India or a declaration stating no such approval is needed

1. A certified copy of the charter, statutes or MOA/AOA, of the company or 7. Declaration that none of the directors or Authorised agents
other instrument constituting or defining the constitution of the company.
If the instrument is not in the English language, a certified translation of the
have ever been convicted or debarred from forming a company in
same to English language India. AND any other information that is prescribed

2. The full address of the registered or principal office of the 6. Particulars of Opening and closing of place of business in
company. India on earlier occasion or occasions

3. A list of directors and secretary of the company containing

details such as; 5. the full address of the office of the company in India which is
a) Personal name and surname in full b) any former names c) deemed to be its principal place of business in India
fathers/mothers/spouse name d) DOB e) residential address &
nationality e) his nationality of origin if there has been a 4. the name and address or the names and addresses of one or
change f) passport number, date & country of issue, details of more persons resident in India authorized to accept on behalf
other passports if he/she holds more than one passport g) PAN of the company service of process and any notices or other
& occupation if any h) Details of DIN & CIN of companies documents required to be served on the company
where he/she is a director i) Email ID j) Membership number (I.e. designated SPOC for sending documents or notices to the
for secretary only company in India)
Note : Where a company ceases to carry have a place of business in India -> It shall give a notice to registrar and from such date of
Chapter 11
notice -> obligation of company to deliver notices to registrar shall cease provided it has no place of business.
 Chapter 11 Companies Incorporated Outside India
Section 381 Accounts of a foreign company

Every foreign company in every Calendar year PROCEDURES TO BE FOLLOWED FOR FILING WITH REGISTRAR
shall Prepare Balance sheet and Profit and Loss
Every Company under this chapter shall within 6 Months from the end of the Financial
account and deliver a copy of that to the registrar
Year file the following with Registrar

The same shall be prepared as per Schedule III for A. File in form FC-3 along with FS list of all places of business established by the foreign
it’s Indian business operation. company In India on the date of Balance sheet.

Provisions related to Consolidated Financial B. Along with FS attach details of

(i) Statement of related party transaction
statements & Financial Year – SAME AS SECTION
(ii) statement of repatriation of profits
129 (iii) statement of transfer of funds (including dividends if any)

A. Incorporated on or after 1st Jan -> Year ends C. Can seek extension from Registrar for any special reason for a period not exceeding 3
same year on 31st March or 31st March of next months
year
NOTE : Every foreign company in relation to it’s Indian Business Operations shall get
it’s Books of accounts audited by a CA or a CA Firm in practise (The chapter Audit &
B. Holding/Subsidiary/associate of a foreign Auditors shall Mutandis Mutandis apply to this chapter)
company following a Different FY – The Foreign
company for the purpose of consolidation can
follow the same FY provided it has obtained a A. The Name of the company and country where it originates from shall be
placed -> In every place or office where business is carried on, All business letter
prior permission from CG heads, bill-heads, letter papers, notices and official publications of the company Section 382
– THE SAME shall be Legible in English (name outside offices additionally shall be
in Vernacular language)
Display of
C FY other than 31st March – Yes allowed provided name of
CG permission is obtained. B. Details of Limited liability of Members to be mentioned in -> In every place or foreign
office where business is carried on, All business letter heads, bill-heads, letter
papers, notices, Prospectus Issue, Advertisements and official publications of
company
D. Translate FS documents to English where the
the company – THE SAME shall be Legible in English (name outside offices
same is not in English additionally shall be in Vernacular language) Chapter 11
 Chapter 11 Companies Incorporated Outside India

Section 383 Service on Foreign Company Section 384 – Debentures, Annual Return, Registration of charges,
Books of Account and their inspection + Section 391

Where any Document, Notice or process is

required to be served on a foreign company, 1. Section 71 (Debentures) + Provisions applicable with certain
it is sufficient if the same is served to an Section 77 to 87 (Charges) + exceptions or Modifications
authorised person as mentioned U/s 380 OR (Inspection, Inquiry &
left at or sent by post to the address Investigation) -> Mutandis 1. Section 92 – Annual return
mentioned to registrar of the company. Mutandis Foreign company to file AR within
(applicable to this chapter same 60 days of end of FY in form FC-4
as how it is in their respective
Section 385 – Fees for Registration of chapters for other companies) 2. Section 128 – Books of accounts -
Documents shall apply to a foreign company to
2. Section 34 to 36 – Civil and the extent of requiring it to
Criminal Liability is applicable for keep at its principal place of
Any fees to be payable to the registrar to foreign companies issuing business in India relating to it’s
register any document as required by this prospectus U/s 387 (S. 391) business in India
chapter will be prescribed in Companies
(Registration of offices and fees) Rules, 2014. Director in relation to a foreign 3. Section 135 – CSR - Where the
company, includes any person in foreign company meets the
Section 386 – Interpretation accordance with whose eligibility for CSR, then the company
(Interpretation of a few terms for this chapter) directions or instructions the has to follow Section 135 (CSR)
Board of Directors of the
company is accustomed to act 4. Section 376 – Winding up provisions
Certified means certified in prescribed are applicable to a foreign company as if it
is an Indian company incorporated in
manner to be a true copy or a correct India and has not repaid money raised
translation Place of Business Includes Share
through issue of prospectus. (S. 391)
transfer or Registration office
Chapter 11
CA CS Karthik Manikonda (75501 37279)
 Chapter 11 Companies Incorporated Outside India
Section 387 – Section 391
Provisions Related to Prospectus

Section 387 – Dating of Prospectus Other Concepts Section 388 – Provision as to Expert’s consent &
in Section 387 allotment
1. No person can issue or circulate a
prospectus for a foreign company A. Expert Approval -> If the prospectus includes statements from
incorporated or to be incorporated with a an expert (like a financial analyst), that expert must agree in
Place or business or without a place of writing to their statements being in the document.
business UNLESS the prospectus is DATED Any condition in the (i) If the expert changes their mind before the document is
and SIGNED prospectus waiving the officially REGISTERED and withdraws consent, or
compliance with a few (ii) Expert has not given the statement or the statement given by
provisions for the applicant him is different from the one which is present in the prospectus
2. The prospectus shall contain the following
with his consent or not is
details; Then, the document (prospectus) can't be shared.
VOID
A. The Instrument defining the constitution
of the company (MOA/AOA) B. The prospectus must COMPLY WITH basic provisions. When
B. The Act under which the Company is someone applies based on the prospectus, everyone involved must
enacted follow certain rules (mentioned in sections 33 and 40 of the Act)
C. Address in India where the Above related to issuing application forms for securities and dealing with
documents are available (If the same are securities in stock exchanges
not in English, translate to English)
D. The date and country where the
company is Incorporated No person shall issue a Prospectus PROVISIONS u/s 387
prospectus for a foreign are Not needed in case of
E. Whether the company has established a
company to anyone in A. Issue to existing members or debenture holders
place of Business in India and if so the India unless it is issued as a B. Securities issued are uniform with securities
address of it’s principal Place of Business. prospectus complying with previously issued AND Listed on RSE.
provisions of this chapter Exception : Dating of prospectus is still
Note : Above point A,B,C is nit applicable Exception : applicable
where 2 years is completed since the date Underwriting
of Incorporation of the foreign company.
Chapter 11
CA CS Karthik Manikonda (75501 37279)
 Chapter 11 Companies Incorporated Outside India
Section 389 Registration of Section 390 Offer of Indian Depository Receipts
Prospectus (Indian Depository Receipts (IDR) means any
instrument in the form of a depository receipt created by a Domestic
Depository in India and authorized by a company incorporated
According to the Companies (Registration of Foreign Companies) outside India making an issue of such depository receipts)
Rules, 2014 the following documents should be Annexed to the
Prospectus

1. Any Expert consent if Any In simple words IDR’s mean

2. Appointment copy of Managing Director or Manager , if such
appointment is oral, then full particulars of the contract Indian Depository Receipts (IDRs) are like certificates
3. Details of Material Contracts entered in the last 2 years representing ownership in foreign companies. They allow Indian
4. A copy of Underwriting Agreement if Any investors to own shares in a foreign company, traded on Indian
5. A copy of POA, if prospectus is signed through duly authorised stock exchanges. IDRs simplify international investments, letting
agent of directors. Indians access global companies without directly navigating
foreign stock markets

The prospectus After attaching the above documents now

A. has to be certified by the chairperson of the company AND The Central Government will make rules for the offer of
IDRs, manner in which they shall be issued, manner of sale
two other directors of the company who are approved by the
or transfer or transmission of IDR, manner of underwriting
Managing body (Board) of the company and the foreign company has to follow the same in Addition
to SEBI Guidelines
What will they certify?
The will certify that such prospectus has been delivered to
the registrar for registration
Note : Where a foreign company enters into a M&A
with an Indian company the deal will need permission
B. The prospectus shall also state on it’s face that the copy of the Central government and RBI – Provisions of
has been delivered Chapter XV (Compromise, arrangement and
amalgamations ) are mutandis mutandis applicable.
Chapter 11
CA CS Karthik Manikonda (75501 37279)
 Chapter 11 Companies Incorporated Outside India

Section 392 Punishment for Contravention Section 393 – Company’s Failure to comply with provisions of this
chapter not to affect validity of contracts

Where the provisions of this chapter are

contravened, the penalty Is as follows;

A. Company -> Fine on Defaulting Foreign

Where a foreign company fails
Company NOT LESS than 1 lakh but I.e. It will not affect the validity of any
to comply with the provisions contract, dealing or transaction entered
up to Rs 3 Lakhs.
of this chapter It will not affect into by the company or it’s liability when
B. In case of an continuing offence -> Rs sued by a third party.
the right of third parties
50,000 per day during which the default However The Company Cannot COUNTER
against the company, However sue/claim, claim set-off or institute any
continues
it does affect the right of the legal proceedings in respect of any such
C. Punishment for Officer -> Minimum of Rs contract until the company has complied
company to sue against the with the provisions of this Act.
25,000 but which may extent up to Rs
Third party.
5,00,000 Rupees

Rule 12 of Companies (Registration

of foreign companies) Rules, 2014
Exemptions Under this Chapter
If any Person or persons carry on
business described as a foreign
The Central Government may, by notification company, then they shall get
Current Exemption registered under this act as a
exempt any class of IFSC is exempt in so far as related
A. Foreign companies foreign company, Else Would be
to offering for subscription in the liable for Investigation under this
B. Companies Incorporated or to be securities by issue of prospectus.
incorporated outside India, whether the Act.
(International Financial Services
company would or would not establish a place centre)
of business in India Chapter 11
CA CS Karthik Manikonda (75501 37279)