CA Shubham Singhal (AIR 4)

Chapter 11
Companies Incorporated
Outside India

AR Authorised Representative IDR Indian Depository Receipts

BC Body Corporate POB Place of Business
Biz Business PRI Person Resident in India
Co. Company STO Share Transfer Office
DH Debenture Holders SRO Share Registration Office
FC Foreign Company

Foreign Company [Sec 2(42)]: 4 9 10 14 18

FC means a company/body corporate incorporated outside India which:

a. has a POB in India (itself/agent, physical/e-mode), AND
b. conducts any business activity in India in any manner.

Conceptual Clarity Check:

1. Would a company incorporated outside India conducting business in India without having POB
in India be considered as a FC? – Yes. On literal interpretation of the definition, the word
“and” shows that both POB and conduct of activity is needed. But this sec is to be interpreted
under Exception Construction. i.e., the word “and” in definition is to be read as “or”.
2. FC is not a co. u/s 2(20) but is a BC u/s 2(11) because FC is incorporated outside India.
1 3. Registrar has jurisdiction over FCs? - Registrar having jurisdiction over New Delhi
4. A FC has POB in West Bengal. To which RoC will it file necessary docs to? – New Delhi RoC
5. If BoD of a co. incorporate outside India meets and executes business decision in India, would
it make it a FC? – No.
6. If a co. incorporated o/s India authorizes Mr. X in India to find customers and enter into
contract on behalf of co., Is such co. a FC?– Yes. Such arrangement establishes POB in India
through agent.
7. Place of business includes Share Transfer Office and Share Registration Office
8. If a person not being an FC carries on business or trade as FC – Liable for investigation u/s 210.
9. Branch offices are considered as reflection of parent company’s office.

Place of Business via electronic mode bole toh?

Carrying out following business electronically, whether or not the main server is in India or outside
[TDS OC]:
¾ B2B or B2C Transactions (E.g., Udaan, Amazon), data interchange or other digital supply
transaction (E.g., Netflix).
¾ Offering to accept, inviting or accepting Deposits or subscription to securities in India or from
Citizen of India
¾ Following Services:
Fin. settlement Web based mkt. Advisory and Database Supply chain
(E.g. Paypal) [Eg. Google Ads] transactional service services Mgt.

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 CA Shubham Singhal (AIR 4)

¾ Online services:
Telemedicine [Online doc Education &
Telemarketing Telecomuting
consultation] info research

¾ All related data communication via email/social media/mobile, etc.

Note – E-offering of securities, subscription, and listing of securities in IFSCs shall not be construed
as an electronic mode for Foreign Cos. [Amendment]

Section 379: Application of Act to foreign companies 8 12 19

1. Sec 380-386 and 392/393 shall apply to FCs (i.e., 387 to 391 – N.A.) [Amendment]

2. Where not less than 50% of PUSC (Equity/Preference) of Foreign co. is held (singly/aggregate)
by:
a. one or more citizen of India
b. one or more companies or BC incorporated in India
c. one or more citizens of India and one or more cos. or BC incorporated in India,
such co. shall comply with provision of this Chapter, in respect of its Indian business, as if it
were company incorporated in India.

Conceptual Clarity:
1. An Indian citizen incorporated a co. in Singapore for business in Singapore. Is it a FC? – No.
The fact that founder/promotor/owner of a co./BC is Indian would not impact the decision
whether it is a FC or not.
2. A co. is incorporated in India having 100% Foreign Shareholding. Is it a FC? – No. Co.
incorporated in India is a company u/s 2(20) and not FC.

Section 380: Documents, etc., to be delivered to Registrar by foreign companies

1. Every FC shall within 30 days of establishment of POB in India deliver the following to RoC
(New Delhi) for registration [CA2R PDC]: 2 6 7 11

List of all Directors/

Certified Charter Docs – MoA/ Full Address
Full Address secretary of co.
AoA or any other instrument of office of
of principle [Name, Father's
defining constitution co. deemed to
office of co. Name, DOB, Address,
[Certified translation in be principal
(not in India) nationality, passport,
English language] POB in India
PAN, DIN, etc]

Name and Address of Particulars Declaration that none of

PRI auth. to accept of Opening/ director/AR (not secretary) Other
notices/other docs Closing of POB in are Convicted/debarred from prescribed
served on co. India in earlier formatn of co./mgt. thereof - info.
[Auth. Representative] occassions India/Abroad

2. Alteration to docs already submitted to RoC – Inform RoC within 30 days of alteration Form
FC-2

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 CA Shubham Singhal (AIR 4)

Companies (Registration of FC) Rules, 2014:

1. Above info. to be filed with RoC in Form FC – 1
2. Above application to be supported with an attested copy of:
a. approval of RBI under FEMA and approval from other regulators if required or
b. declaration from AR that no such approval is required
3. If a FC ceases to have POB in India, it shall forthwith give notice to RoC and from date of
such notice, obligation to file docs with RoC ceases, provided no other POB.

Section 381: Accounts of foreign company 3

1. Every FC shall, in every CALENDAR YEAR,

a. Make BS, P&L in prescribed forms, particulars and annexures
b. Deliver a copy to RoC
CG may exempt FC from applicability of this.
2. If not in English – Certified Translation thereof in English to be annexed
3. Along with above docs, FC to send to RoC – List of POB in India as on BS date (in Form FC-3)

Companies (Registration of FC) Rules, 2014:

1. FC to prepare FS for its Indian business operation as per Sch III for each Financial year
2. Docs to be annexed to FS – As per Chap IX – Accounts of Companies [Sec 128-138]
3. Docs relating to CFS of Parent FC also to be submitted (if not in English, certified translation)
4. Annex following additional docs/statements, along with FS:
¾ Statement w.r.t, RPT
¾ Statement of Repatriation of Profit
¾ Statement of Transfer of Funds (incl. Dividend)
5. Time limit for delivery of above docs to RoC:
¾ Within 6m from close of FY
¾ RoC may on application, extend the time limit by 3m
6. Audit of books of Indian business ops – By practicing CA or Firm/LLP of CAs
7. Provision of Chap X (Sec 139-148) i.e., Audit and Auditors shall apply mutatis mutandis

Note regarding filing of annual return of the Indian operations of the foreign company:
As per Companies (Registration of FC) Rules, 2014, every FC shall prepare & file Annual Return in
Form FC-4 + Fees within 60 days from last day of FY to RoC containing particulars as on close of FY.

Section 382: Display of name of Foreign Companies: 23

Every FC shall conspicuously exhibit:
Where? Outside of every office or POB in India Business letters, bill-heads, letter papers,
& all notices and other publications,
What? ¾ Name of the co. ¾ Name of the co.
¾ Country of incorp. ¾ Country of incorp.
¾ State whether liability of members ¾ State whether liability of members of
of co. is limited co. is limited
Language? ¾ Letters easily legible in English, and ¾ Letters easily legible in English,
¾ Local Language used in POB ¾ Local Language

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Section 383: Service on Foreign Company: 16 22

¾ Any notice/other docs required to be served on FC

¾ shall be deemed to be sufficiently served if:
o Addressed to Auth. Representative of such FC (as per Sec 380), and
o Left at or sent by post or e-mode at such address

Section 384: Applicability of other sections

Following provision of Companies Act shall apply to Foreign Co.:
Section Provisions related to: Applicable to Indian business of FCs
71 Debentures Mutatis Mutandis
92 & 135 Annual Return and CSR Subject to Exceptions, Modifications & Adaptations
as per Rules
128 BoA to be kept by Co. To the extent that BoA to be kept at POB in India
Chap VI Registration of Charges Mutatis Mutandis
Chap XIV Insp., Inq. and Investigation Mutatis Mutandis (Sec 228)

Section 386: Interpretation

1. “Certified” means certified to be a true copy or correct translation.
Translation can be done in India or outside India. Who shall authenticate such translation?

13 Where a translation is to made within India, it shall be authenticated by:

a. an advocate, attorney or pleader entitled to appear before any High Court; or
b. an affidavit, of a competent person having, in the opinion of the Registrar, an adequate
knowledge of the language of the original and of English.

17 Where translation is done outside India, it shall be authenticated by signature and seal of:
a. an official having custody of the original, or
b. Notary of the country where company is incorporated
2. “Director” w.r.t., FC includes person on whose direction or instruction, BoD is accustomed to act.
3. “Place of Business” includes Share Transfer Office & Share Registration Office (STO and SRO)

Section 387: Dating of prospectus and particulars to be contained therein.

1. No prospectus offering to subscribe to any securities shall be issued or circulated by a Co.
incorporated o/s India (not FC) unless such prospectus:
a. is dated and signed.
b. contains particulars w.r.t., following matters [Instrument Incorp. karne ke liye ACP ko bulaya]:
i. Instruments defining constitution of the co.
ii. Enactments/provisions under which co. was incorporated.
iii. Address where (i) and (ii) above or English translation thereof can be inspected
iv. Date and country of incorporation
v. Whether co. has estb. POB in India. If so, address of principal POB
c. states matter specified u/s 26 (Matters to be stated in Prospectus)
Note: Points of b (i),(ii) and (iii) N.A. if prospectus is issued > 2 years after co. is entitled to
commence business [Agar nayi taazi co. (<2 years) hai to declare karo, warna mat karo]

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 CA Shubham Singhal (AIR 4)

2. Compliance with conditions mentioned u/ss (1) cannot be waived off on any grounds.
3. Application forms for securities of a Co. incorp. o/s India shall be issued subject to following:
a. Such appln is issued with prospectus which is in compliance with this Chap
b. Such issue does not contravene provision of sec 388 (Expert’s consultation)
Exception: Where such form for appln. is issued to a person to enter into underwriting agreement.

4. Sec 387 N.A. (except for dating of prospectus) to issue of prospectus:

a. relating to issue of sec. of co. to existing members or DH, or
b. offering securities which is uniform with sec. previously issued and listed on RSE

Section 388: Provisions as to expert‘s consent and allotment: 20

1. Where the prospectus includes expert’s statement, no such prospectus shall be issued or
circulated by a Co. incorporated o/s India (not FC), unless such expert:
¾ has given written consent to issue
¾ has not withdrawn, before delivery of the prospectus for registration, such written consent
¾ a statement appears in the prospectus that expert’s written consent is given and not
withdrawn

2. A statement shall be deemed included in prospectus, if it is contained in any report/memorandum

appearing on the face thereof or by reference incorporated therein.

Section 389: Registration of prospectus: 5 21

No prospectus shall be issued/circulated unless all the following conditions are satisfied:
a. A certified copy has been delivered for registration to RoC
Certification to be done by Chairperson and 2 dir. (as approved by resoln. of managing body)
b. Prospectus states on the face that a copy has been so delivered,
c. Consent (of expert) to issue the prospectus is attached.
d. Such other prescribed docs is attached

Companies (Registration of FC) Rules, 2014: [EC2UA]

Following docs to be annexed to prospectus:
a. Expert’s consent u/s 388
b. Copy of contract or memorandum for appt. of MD/Manager
c. Copy of material contracts in last 2 years not in OCOB
d. Copy of underwriting agreement
e. Copy of power of attorney if prospectus is signed by auth. agent of directors

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Section 390: Offer of IDRs

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 outside India making
an issue of such depository receipts.

According to section 390, notwithstanding anything contained in any other law for the time being in
force, the CG may make rules applicable for:
(i) the offer of IDR;
(ii) the requirement of disclosures in prospectus or letter of offer issued in connection with IDR;
(iii) the manner in which the IDR shall be dealt with in a depository mode and by custodian and
underwriters; and
(iv) the manner of sale, transfer or transmission of IDR,
by a company incorporated or to be incorporated outside India, whether the company has or has not
established, or will or will not establish, any place of business in India.

As per Rule 13 of the Companies (Registration of Foreign Companies) Rules, 2014, foreign companies
cannot issue Indian Depository Receipts (IDRs) without complying with the specified conditions,
alongside adhering to regulations by SEBI and directions from RBI.

Chapter XV provisions apply to schemes of mergers and amalgamations between companies registered
under the Act and those incorporated in notified foreign jurisdictions. The Central Government, in
consultation with RBI, may create rules for such mergers and amalgamations.

Foreign companies can merge with companies registered under the Act, or vice versa, with prior
approval from RBI. The scheme of merger may provide consideration to shareholders in cash or
Depository Receipts, as per the scheme's terms.

Explanation: For the purposes of sub-section (2) above, the expression “foreign company” means
any co. or BC incorporated outside India whether having a place of business in India or not.

Section 391: Application of Sec 34 to 36 and Chap XX (Winding up)

1. The provisions of sections 34 to 36 (both inclusive) shall apply to—
(i) issue of a prospectus by a co. incorporated outside India u/s 389 as they apply to prospectus
issued by an Indian co.;
(ii) issue of Indian Depository Receipts by a foreign co.

2. Winding up provision shall also apply to FC.

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Section 392: Punishment for Contravention [Very important penalty]: 1

If a FC contravenes prov. of this chapter:

Foreign Co. OID
Fine Rs. 1 lakh to Rs. 3 lakhs Rs. 25,000 to Rs. 5 lakhs
Additional Fine Rs. 50,000/day NA
Jail NA NA [Amendment]

Section 393:
Co‘s failure to comply with prov. of this Chapter not to affect validity or contracts, etc entered into
by such co. or its liability to be sued in respect thereof, but the company shall not be entitled to
bring any suit, claim any set-off, make any counter-claim or institute any legal proceeding in respect
of any such contract, dealing or transaction, until the company has complied with the provisions of
this Act applicable to it.

Section 393A: Exemption by CG

CG may, by notification, exempt from provision of this chap:
a. Foreign company
b. Co. incorp o/s India whether or not having POB
insofar as they related to offering of securities, relating to prospectus or incidental matters in the
International Financial Service Centers set up u/s 18 of SEZ Act, 2005

Copy of such notification should be laid before HoP.

The End

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