CA Intermediate · Corporate and Other Laws

Companies Incorporated Outside India: formula sheet

Full chapter guide

Key formulas

Definition of foreign company, Section 2(42): Foreign company = Company or body corporate incorporated outside India + (a) place of business in India (by itself or through an agent, physically or through electronic mode) + (b) conducts any business activity in India in any other manner; All three parts must be present. Remove any one and it is not a foreign company under this definition. Limbs (a) and (b) are cumulative. Limb (b) is a residual clause covering any business activity in India in any other manner.
Meaning of body corporate, Section 2(11): Body corporate includes a company incorporated outside India; excludes registered co-operative societies and bodies the Central Government notifies; Use it to show that a foreign incorporated entity can qualify. Co-operative societies are excluded.
Indian company test, Section 2(20): Company = incorporated under the Companies Act, 2013 or any previous company law; Use it for the contrast: Indian company is incorporated in India under company law; foreign company is incorporated outside India.
Time limit for initial filing: Within 30 days of establishing a place of business in India; Section 380(1). The trigger is establishing the place of business, not incorporation abroad.
Time limit for alterations: Within 30 days of the alteration, file a return in the prescribed form; Section 380(3). Applies to any change in the documents already delivered.
Documents under Section 380(1): (a) charter/MOA/AOA + certified English translation; (b) address of registered or principal office of the company; (c) list of directors and secretary; (d) Indian resident authorised to accept service; (e) address of the office in India deemed to be its principal place of business in India; (f) earlier opening/closing particulars; (g) declaration on conviction/debarment; (h) other prescribed information; Remember the eight items (a) to (h). Translation is needed only if the instrument is not in English. Keep (b) and (e) apart: (b) is the company's registered or principal office, while (e) is the office in India deemed to be its principal place of business in India.
Service of documents: Served if addressed to the person named under Section 380 and left at or posted to the delivered address, or sent electronically; Section 383. Ties the Indian authorised person to valid service.
Application of the section: Sections 380 to 386 and 392, 393 apply to all foreign companies; Section 379(1). Section 379(2) adds that where at least 50% of paid-up share capital is held by Indian citizens or Indian companies or bodies corporate, the company must comply as if it were an Indian company.
Accounts of foreign company (s.381(1)): Every calendar year: balance sheet + profit and loss account (prescribed form) → copy to Registrar; The Central Government may by notification direct that, for a foreign company or class of foreign companies, the requirements of clause (a) (making out the balance sheet and profit and loss account) do not apply, or apply with specified exceptions and modifications.
Translation (s.381(2)): Document not in English → annex a certified English translation; Applies to the documents mentioned in s.381(1).
List of places of business (s.381(3)): Send a list (prescribed form) of all places of business in India, as at the balance sheet date, along with the accounts; Filed with the Registrar together with the s.381(1) documents.
Name display at offices (s.382(a)): Outside every office or place of business in India: company name + country of incorporation, in English characters and in the local language; Local language means one of the languages in general use in that locality.
Name on papers (s.382(b)): Name + country of incorporation in legible English characters on all business letters, billheads, letter paper, notices and other official publications; Local-language characters are required only for office display, not for papers.
Limited liability notice (s.382(c)): If members' liability is limited → state that fact on prospectuses, business papers and publications, and display it outside every office; Papers need English characters; office display needs English and local-language characters.
Provisions applied by s.384: s.71 (debentures) mutatis mutandis; s.92 and s.135 with exceptions, modifications and adaptations by rules; s.128 for Indian business books; Chapter VI (charges) mutatis mutandis; Chapter XIV (inspection, inquiry, investigation) mutatis mutandis to Indian business; s.92 is annual return and s.135 is CSR. s.128 books must be kept at the principal place of business in India.
Service of process (s.380(1)(d) and (e)): Name and address of one or more India-resident persons authorised to accept service + address of principal place of business in India; Filed with the Registrar at registration within thirty days of establishing the place of business.
Alteration return (s.380(3)): Alteration in delivered documents → return in prescribed form within 30 days; Applies to changes such as the authorised person or office address.
Prospectus rule (section 389): Certified copy (chairperson + 2 other directors) + board approval + delivery to Registrar BEFORE issue + statement on face of prospectus + section 388 consent + prescribed documents; Applies to a prospectus offering securities of a company incorporated or to be incorporated outside India, whether or not it has a place of business in India.
Liability for prospectus (section 391(1)): Sections 34 to 36 apply to a section 389 prospectus and to IDRs issued by a foreign company; Treat it like an Indian company's prospectus for misstatement liability.
Closure of place of business (section 391(2)): Chapter XX applies mutatis mutandis if money raised under this Chapter is not repaid or redeemed; Subject to section 376.
Application of the Chapter (section 379): (1) Sections 380 to 386, 392 and 393 apply to all foreign companies. (2) If at least 50% of paid-up share capital is held by Indian citizens and/or Indian bodies corporate, the company complies with the Chapter and other prescribed provisions as if it were an Indian company; The 50% test counts equity and preference capital together, held singly or in aggregate.
Delivery of documents (section 380): Documents within 30 days of establishing a place of business in India; alterations within 30 days of the alteration; Includes charter or memorandum and articles, address of registered office, list of directors and secretary, and an authorised person resident in India.
Accounts (section 381): Balance sheet and profit and loss account every calendar year + copy to Registrar + list of Indian places of business; Certified English translation if not in English. The Central Government may exempt by notification.
Charges (sections 384(4) and 77): Chapter VI applies mutatis mutandis. Section 77 periods, with necessary adaptations: register within 30 days of creation; Registrar may allow 60 days on application and additional fees; then a further 60 days on payment of ad valorem fees (charges created on or after the Companies (Amendment) Act, 2019); Because Chapter VI applies only mutatis mutandis, the section 77 periods apply with necessary adaptations, not identically. Under section 77, an unregistered charge is not taken into account by a liquidator or other creditor, but the repayment obligation survives.
Penalty (section 392): Company: ₹1,00,000 to ₹3,00,000, plus up to ₹50,000 for every day after the first if the contravention continues. Officer in default: ₹25,000 to ₹5,00,000; For a continuing contravention, the most the company can face is the maximum base fine of ₹3,00,000 plus up to ₹50,000 for each day after the first. Imprisonment was removed with effect from 21-12-2020. The penalty is without prejudice to section 391.

Quick revision

A foreign company is incorporated outside India under Section 2(42).
Test 1 (limb a): it has a place of business in India, by itself or through an agent, physically or through electronic mode.
Test 2 (limb b): it conducts any business activity in India 'in any other manner'.
In the text of Section 2(42), clauses (a) and (b) are joined by 'and'. Read each clause as the Act words it and apply it to the facts.
A body corporate includes a company incorporated outside India, but not a co-operative society.
Under Section 380, the foreign company delivers prescribed documents to the Registrar after setting up its place of business in India.
The filing names at least one person resident in India authorised to accept service of documents.
It must file its financial statements with the Registrar as prescribed.
A foreign company must exhibit its name and country of incorporation at its offices in India and on its business documents, as the Act requires. Check the exact list and the limited-liability statement in the bare Act.
A foreign company issuing a prospectus in India must follow the prospectus provisions applicable to it.
Default invites a penalty on the company and its officers who are in default.

Common mistakes

Treating any company with foreign shareholders as a foreign company. Fix: The test is the place of incorporation. A company incorporated in India is not a foreign company, whoever owns its shares.
Saying incorporation outside India alone makes it a foreign company. Fix: Also prove a place of business in India and business activity in India in any other manner. All parts are needed.
Counting 30 days from incorporation abroad Fix: The trigger is establishing a place of business in India.
Forgetting the Indian resident authorised to accept service Fix: Memorise clause (d) and link it to Section 383 on service.
Saying a foreign company files accounts for the financial year ending 31 March. Fix: s.381 says in every calendar year. Use those words.
Forgetting the certified English translation. Fix: If any s.381(1) document is not in English, a certified English translation must be annexed.
Saying the prospectus is certified by all directors or only by the chairperson. Fix: Remember 'chairperson plus two other directors', approved by resolution of the managing body.
Writing that section 389 applies only to foreign companies already having a place of business in India. Fix: Section 389 applies whether or not the company has or will establish a place of business in India.

Exam tips

Always quote or paraphrase Section 2(42) first. The provision step earns marks before you touch the facts.
Test each limb in the answer and name the fact that satisfies it. Say clearly that both (a) and (b) must be met.
Look for traps in the facts: Indian incorporation, foreign shareholders, or a co-operative society.
Remember agent and electronic mode. Questions often use an online seller or an Indian agent to test limb (a). Then look for the business activity in India that satisfies limb (b).
For an MCQ, find the one option that applies all conditions together. Options that need only one condition are usually wrong.
Write the thirty-day limit twice: once for initial filing and once for alterations. Examiners look for both.
In list questions, number the documents (a) to (h) so each point can earn a mark.
In case-based questions, name the trigger date first and then count days, showing the working.