FOREIGN COMPANY ESTABLISHMENT AND COMPLIANCES UNDER COMPANIES ACT 2013
FOREIGN COMPANY ESTABLISHMENT AND COMPLIANCES UNDER COMPANIES ACT 2013
As
Per Section 2 (42)
Foreign company is a company or body corporate incorporated
outside India which
(a) has a place of business in
India whether by itself or through an agent, physically or through electronic
mode; and
(b) conduct any business activity
in India in any other manner
Simple definition give understanding that even a company
incorporated outside India, has simple electronic present, which may be used
for business in
India is a foreign company
Note:
# Share transfer or share registration office will be treated as a
‘place of businesses.
# It was held that ‘established place of business’ means a
permanent and specific location from where business is carried on regularly. If
foreign company had no established place of business at the time of signing the
contract, the company is not governed by restriction under Act.
Mere appointment of constituted attorney for purpose of signing
contract does not mean that foreign Company
has established business in India.

Ø Branch Office
Ø Liaison Office
Ø Project Office
Ø Corporate Entity which
could be wholly or partly owned by the foreign company (FIPB route).
Ø Joint Venture/
Partnerships etc.
For Establishment of office
of foreign Company in India. We have to follow provisions of two Acts:
1. RBI Act-
(Already discussed in detailed in my earlier article)
2. Companies
Act, 2013
COMPANIES ACT:
PROCEDURE AFTER GETTING THE
RBI APPROVAL:
Every Foreign Company
registered with RBI shall get itself registered with the Ministry of Corporate
Affairs; it is a registration of foreign company in India. On such registration
a CIN i.e. Corporate Identity Number is allotted by the Registrar of Companies.
A foreign Company
established a place of business in India should submit following documents
shall be filled with the Registrar of Companies for registration within 30 days of
establishment of place of business in India in form FC-1:-
- Certified copy of Charter, statutes or memorandum and articles of association or other Instrument constituting or defining the constitution of the company. If it is not in English language, its certified translation should also be submitted.
- Approval letter from Reserve Bank of India for the setting up of business in India is to be attached. (It is mandatory to attach attested copy of such approval)
iii. List
of directors and secretary of the foreign company (Mandatory). Details should
contain present and former name & surname, his usual residential address,
nationality, business occupation etc. [“ Director”, in relation to a foreign
company, includes any person in accordance with whose directions or
instructions the Board of Directors of the company is accustomed to act.
Section 389(b)]
iv. Name
and address or names and addresses of one or more person/s resident in India,
authorized to accept service, process, notice or any other document in India on
behalf of the Foreign Company.
v. Power
of attorney or board resolution in favour of the authorized representatives is
to be attached.
vi. Full address of the office of the company in India which is
deemed to be its principal place o business in India.
vii. Particular of opening and closing of a place of business in
India on earlier occasion or occasions; if any.
viii. Declaration that none of the directors of the company or the
authorized representative in India has ever been convicted or debarred from
formation of companies and management in India or abroad;
ix.
Attested copy of approval of other regulators, if any.
x. Any other information as may be prescribed (particulars about
directors and secretary as specified in Rule 3 of Companies (Registration of
Foreign Companies) Rules, 2014.
Relevant
registrar:
Relevant registrar for
foreign companies is Registrar of Companies of NCT of Delhi & Haryana.
Digitally
Signature of Form:
The form will be digitally
signed by the authorized representative of the foreign company
Certification
of documents:
Certifications of any
charter, statute, memorandum and articles shall be duly certified as true copy
by notary or officer as specified in rule 9 of Companies (Registration of
Foreign Companies) Rules, 2014.
Authentication
of translated document:
Translated document
shall be authenticated as specified in rule 10 of Companies (Registration of
Foreign Companies) Rules, 2014
After completion of above
mentioned compliances ROC will issue Corporate Identification No. to Foreign
Company.
OPTIONAL
COMPLIANCE:
ALTERATION/ CHANGE IN INFORMATIONS:
If
there is any alteration in below mentioned details, i.e. (as given below) a
return should be filed with Registrar of Companies Section 380(3). The
alteration is required to be filed in form FC-2.
·
Memorandum,
registered office, director, secretary, representative in India or principal
place of business in India.
·
If
foreign Company ceases to have office in India, that fact should also be
informed.
Form FC-2:
Attachments into Form FC-2:
·
Certified
true copy of Resolution.
·
Copy
of approval letter (it is mandatory if any approval is required for such
alteration).
·
Translated
version of the documents in English (in case documents attached are not in
English).
·
Particulars
of alterations in the place of business in India of the company, If change.
·
Particulars
of alteration in details of the directors or secretaries, If change.
·
Particulars
of alterations in details of the company authorized representative, If change.
REGULAR
COMPLIANCE:
A. FINANCIAL STATEMENT:
Section 381 of the
Companies Act, 2013 and Rule 4, 5 and 6 of Companies (Registration of Foreign
Companies) Rules, 2014.
Every foreign company
shall, in every calendar year, Make out a balance sheet and profit and loss account.
Copy of balance sheet and
P&L account should be filed with ROC along with English translation and
list of place of business established by the foreign company in India- Section
381(1) in form FC-3.
v As per Rule 4(1) every
foreign company shall prepare financial statement of its Indian business
operations in accordance with Schedule III.
v These should be
submitted with consolidated financial statement of foreign Company.
v If such documents are
not in English language, there shall be annexed to it a certified translation
thereof in the English language.
v Statement of Related
party transaction.
v Statement of
Repatriation of profits.
v Statement of transfer of
funds (including dividends if any) which shall, in relation of any fund
transfer between place of business of foreign company in India and any other
related party of the foreign company outside India including its holding,
subsidiary and associate company.
Audit
of Financial Statement:
Audit of Accounts of
Foreign Company shall be conducted by practicing Chartered Accountant (CA) or
firm of Chartered Accountant- Rule-5 of Companies (Registration of Foreign
Companies) Rules, 204.
B.
ANNUAL RETURN BY FOREIGN COMPANY:
Annual return shall be
submitted within 60 days of close of financial year in form FC-4 with fees. Rules- 7 of
Companies (Registration of Foreign companies) Rules, 2014.
Purpose of the e-Form
Every
foreign company shall prepare and file annual return of the company in e-Form
FC-4 within 60 days from the close of financial year.
Form- FC-4
will be file with following attachments:
i.
Details of Promoters, Directors and Key managerial personnel
and changes therein since close of previous financial year. (Mandatory)
ii.
Details of directors and key managerial personnel and their
remuneration. (Mandatory)
iii.
Details of the meeting of the members or class thereof, board
and its various committees along with attendance details. (Mandatory).
iv.
Particulars of members and debenture holders along with
changes therein since the close of previous financial year. (Mandatory).
v.
Particulars of Holding, subsidiary and associate companies
and firms. (Mandatory in case number of entities prescribed at serial no 6 is
more than seven)
vi.
Particulars of Holding, subsidiary and associate companies
and firms. (Mandatory in case number of entities prescribed at serial no 6 is
more than seven)
vii.
Any other information can be provided as an optional
attachment(s).
C. INDICATING AND DISPLAYING DETAILS
OF THE COMPANY:
v
Foreign
Company should conspicuously exhibit outside of every director place of
business in India, in English or regional language of the Locality its name and
the country in which it’s incorporated.
v
All
its business letters, bill-heads, notices and other official publications
should indicate name and country of incorporation in English.
v
If
liability of members is limited, it should be indicated in prospectus, letter
heads, bill heads, notices etc. This fact should also be exhibited outside
every office. Section 382.
D. SERVING OF NOTICE OF FOREIGN
COMAPNY:
v
A
notice to foreign company shall be deemed to be sufficiently served if
addressed to the person in India whose name has been filed with ROC.
v
The
notice may be hand delivered or sent by post or by electronic mode. Section
383.
E. PUNISHMENT FOR NON COMPLIANCE:
v
Punishment
for non compliances with provisions in respect of delivery of documents to ROC,
return, accounts, prospectus, IDR etc. is with fine which shall not be less
then Rs. 1,00,000/- but can extend upto Rs. 3,00,000/- and in case of
continuous offence additional fine of Rs. 50,000 per day.
v
Further
every officer of foreign company who is in default is punishable with fine plus
imprisonment- Section 392
CERTAIN
PROVISIONS APPLICABLE TO FOREIGN COMPANY:
As per Section 384 of
Companies Act, 2013, Following provisions are applicable to foreign company as
are applicable to Indian Company.

The provisions of CSR are
applicable to Foreign Company having branch office or project in India if it
fulfils criteria of ‘Net Profit’ or ‘Turnover’.
The criteria of Net
Profit etc. apply only to business operations in India in case of
foreign Company/ Project Office.

The provisions of Sec 71
of Companies Act, 2013 shall apply mutatis mutandis to a foreign Company. [This
section relates to issue, redemption etc. of Debentures].

The provisions of Sec 92
of Companies Act, 2013, shall subject to such exceptions, modifications and
adaptations as may be made therein by rules made under this Act, apply to a
foreign company as they apply to a company incorporated in India.

The provisions of
Section 128 of Companies Act, 2013, shall apply to a foreign company to the
extent to requiring it to keep at its principal place of business in India, the
books of account referred to in that section, with respect to monies received
and spent, sales and purchases made and assets and liabilities, in the course
of or in relation to its in India.

The
provisions of Chapter VI of the 2013 Act shall apply mutatis mutandis to
charges on properties which are created or acquired by any foreign Company.
The
charges are to be filed electronically in e-form. Satisfaction of charge is to
be filed in e-form.

The provisions of
Chapter XIV of the 2013 Act shall apply mutatis mutandis to the Indian business
of a foreign Company as they apply to a company incorporated in India. The
provisions of Inspection and investigation apply to foreign Company also.
LIMITATION
ON FOREIGN COMPANY:
Restrictions under FEMA:
A foreign company has to adhere to restrictions regarding
conduction business, ownership of property etc. as prescribed by RBI under
FEMA.
Fundamental rights available to citizen not available:
Foreign
Companies don’t have fundamental right guaranteed under Article 19(1)(f) of
Constitution of India..
(Author – CS Divesh Goyal, GOYAL DIVESH & ASSOCIATES Company Secretary in Practice from Delhi and can be contacted at csdiveshgoyal@gmail.com)
Disclaimer: This Document is a copyright of Divesh Goyal. The entire contents of this document have been developed on the basis of relevant statutory provisions. Thought the author has made utmost efforts to provide authentic information however, the author 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 documents. This is only a knowledge sharing initiative and author does not intend to solicit any business or profession…
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