Corporate and Other Laws · Companies Incorporated Outside India

Prospectus by Foreign Company and Related Provisions

Updated 4 October 2026 · Fact-checked

A foreign company that wants to issue a prospectus in India must first deliver a copy, certified by its chairperson and two other directors and approved by its managing body, to the Registrar (section 389). The misstatement rules of sections 34 to 36 apply. Breach attracts fines under section 392. Charges follow Chapter VI with necessary changes.

Understand Prospectus by Foreign Company and Related Provisions

This topic covers companies incorporated outside India and the rules the Companies Act, 2013 sets for them. Under section 379(1), sections 380 to 386 and sections 392 and 393 apply to all foreign companies.

The prospectus rule is in section 389. No person may issue, circulate or distribute in India a prospectus offering securities of a company incorporated or to be incorporated outside India unless certain steps are done first. This applies whether or not the company has, or will have, a place of business in India. So the rule is not limited to foreign companies that already operate here.

Before the issue, a copy of the prospectus must be delivered to the Registrar. It must be certified by the chairperson and two other directors as approved by resolution of the managing body. The prospectus must state on its face that a copy has been delivered. The copy must also carry any consent required by section 388 and the prescribed documents.

Section 391 then brings in the Indian liability rules. Sections 34 to 36 apply to a prospectus issued under section 389 as they apply to an Indian company's prospectus. They also apply to Indian Depository Receipts issued by a foreign company. Section 391(2) adds that Chapter XX applies, with necessary changes, to closing the Indian place of business of a foreign company that has raised money through securities issued under this Chapter and not yet repaid or redeemed it.

Other related rules sit in sections 379, 380, 381, 384 and 392. Section 384 applies the debenture rules (section 71) with necessary changes. It applies the annual return (section 92) and CSR (section 135) rules subject to exceptions, modifications and adaptations made by rules. Section 128 applies only to the extent of requiring the foreign company to keep, at its principal place of business in India, the books of account for its Indian business (money received and spent, sales and purchases, assets and liabilities). Under section 384(4), Chapter VI (registration of charges) applies mutatis mutandis to charges on property created or acquired by a foreign company. Section 77 is the key rule there. Its 30-day period and the extensions that follow apply with the necessary adaptations, not necessarily identically to an Indian company. Chapter XIV applies with necessary changes to the company's Indian business. Section 392 sets the penalty.

Key rules to remember

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.

How to solve Prospectus by Foreign Company and Related Provisions questions

Most questions give a short fact pattern about a foreign company and ask whether it complied, what it must do, or what the penalty is. Use this order.

1Confirm the company is incorporated, or is to be incorporated, outside India. Check whether it has a place of business in India, but note that section 389 applies even if it has none.
2Identify the issue: prospectus, documents, accounts, charge or penalty. Name the rule before applying it.
3For a prospectus, tick each item: certified by chairperson and two other directors, approved by the managing body's resolution, delivered to the Registrar before issue, statement on the face, section 388 consent, prescribed documents.
4For liability, state that sections 34 to 36 apply as for an Indian company, and that section 391 also covers IDRs.
5For charges, say that section 384(4) applies Chapter VI mutatis mutandis. Give the section 77 periods (30 days, then 60 days, then a further 60 days) and note that they apply with necessary adaptations, not identically.
6For penalties, name section 392. State the company's fine range, the daily additional fine and the officer's fine range. Do not mention imprisonment.
7Check the 50% Indian shareholding test in section 379(2). If it is met, the company must comply as if it were an Indian company.
8Close with a one-line conclusion that answers the exact question.

Quickest way: Provision, facts, conclusion in four lines

When to use it: Use it for the written 70-mark part when time is short, and for MCQs on numbers and persons.

Line 1: state the section and the rule in one sentence, for example 'Section 389 requires a certified copy to reach the Registrar before the prospectus is issued.'
Line 2: apply it to the facts, using the figures and names in the question.
Line 3: state the consequence, such as sections 34 to 36 or the section 392 fine.
Line 4: give the conclusion. This is where the final mark sits.
MCQ trick: check the signatories (chairperson plus two other directors), the periods (30, 60, 60 days) and the fines (₹1 lakh to ₹3 lakh; ₹25,000 to ₹5 lakh). Wrong options usually change one of these.
MCQ trick: reject any option that includes imprisonment under section 392, because it has been removed.

Common mistakes in Prospectus by Foreign Company and Related Provisions

Saying the prospectus is certified by all directors or only by the chairperson.
Students remember 'certified' but not who certifies.
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.
The chapter is about companies with an Indian place of business, so students assume the same limit here.
Fix: Section 389 applies whether or not the company has or will establish a place of business in India.
Stating imprisonment as a penalty under section 392.
Old notes still show 'imprisonment up to six months'.
Fix: Only fines remain. Imprisonment was omitted with effect from 21-12-2020.
Mixing up the fine for the company and the fine for officers in default.
Both are ranges in the same section.
Fix: Company: ₹1 lakh to ₹3 lakh plus up to ₹50,000 for every day after the first. Officer in default: ₹25,000 to ₹5 lakh.
Forgetting that delivery to the Registrar must happen before the prospectus is issued.
Students treat registration as a later filing formality.
Fix: Use the word 'before' in the answer. Issuing first and delivering later is a contravention.
Ignoring section 379(2) when Indian citizens or companies hold half the capital.
Students focus on the incorporation place and forget the shareholding test.
Fix: Check the 50% test on paid-up capital, equity and preference together. If met, the company complies as if it were an Indian company.

Worked examples

Example 1

Zeta Inc., incorporated in Country X, plans to offer its securities to the public in India. Its prospectus has been approved by resolution of its managing body and signed by the chairperson alone. A copy will be sent to the Registrar after the offer opens. Advise whether the proposed course complies with the Companies Act, 2013.

Show the solution

Provision: section 389 bars issuing, circulating or distributing in India a prospectus of a company incorporated outside India unless the prescribed steps are completed before the issue.
Requirement 1: the copy must be certified by the chairperson and two other directors as approved by resolution of the managing body. The managing body's approval is in place, but only the chairperson has signed, so the certification requirement is not met.
Requirement 2: the copy must be delivered to the Registrar before the issue, circulation or distribution. Sending it after the offer opens is not compliant.
Also needed: the prospectus must state on its face that a copy has been delivered, and the copy must carry any section 388 consent and prescribed documents.
Consequence: section 391 applies sections 34 to 36 to the prospectus. Issuing it without meeting section 389 is a contravention of the Chapter, so section 392 applies: a company fine of ₹1,00,000 to ₹3,00,000, and ₹25,000 to ₹5,00,000 for each officer in default.

Answer: The course does not comply. Zeta Inc. must obtain certification by the chairperson and two other directors, deliver the copy to the Registrar before any issue, and include the statement and consents. Otherwise it faces the penalties under section 392.

Example 2

A foreign company contravenes the Chapter and the contravention continues for 11 days in all. State the maximum fine that can be imposed on the company under section 392.

Show the solution

Maximum base fine: ₹3,00,000.
Additional fine: up to ₹50,000 for every day after the first during which the contravention continues.
Days after the first day: 11 − 1 = 10 days.
Maximum additional fine: 10 × ₹50,000 = ₹5,00,000.
Maximum total: ₹3,00,000 (maximum base fine) + ₹5,00,000 (up to ₹50,000 for each of the 10 days after the first) = ₹8,00,000.
Officers in default are fined separately: ₹25,000 to ₹5,00,000 each, with no imprisonment.

Answer: The maximum fine on the company is ₹8,00,000: the maximum base fine of ₹3,00,000 plus up to ₹50,000 for each of the 10 days after the first. Officers in default are separately liable to fines only.

Exam tips

Learn section 389 as a checklist of six items. Examiners usually hide one missing item in the facts.
Keep the penalty numbers in a small table in your notes: ₹1 lakh to ₹3 lakh, ₹50,000 per day after the first, ₹25,000 to ₹5 lakh.
In case studies, always check the 50% Indian holding test of section 379(2).
Use 'mutatis mutandis' correctly. Section 71, Chapter VI and Chapter XIV apply to foreign companies with necessary changes. Sections 92 and 135 apply subject to exceptions, modifications and adaptations made by rules. Section 128 applies only to the extent of requiring books of account for the Indian business to be kept at the principal place of business in India.
For charges, say that section 384(4) applies Chapter VI mutatis mutandis, so the section 77 periods (30 days, then 60, then a further 60) apply with necessary adaptations, not identically to Indian companies.
Write the section number in your answer only when you are sure of it. Otherwise state the rule in plain words.

Practice questions from Companies Incorporated Outside India

Prospectus by Foreign Company and Related Provisions in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Prospectus by Foreign Company and Related Provisions: frequently asked questions

What must a foreign company do before issuing a prospectus in India?

It must deliver a copy to the Registrar before the issue. The copy must be certified by the chairperson and two other directors as approved by resolution of the managing body. The prospectus must state on its face that a copy has been delivered, and the section 388 consent and prescribed documents must be attached.

Does section 389 apply if the foreign company has no place of business in India?

Yes. The section covers a company incorporated or to be incorporated outside India, whether or not it has or will establish a place of business in India. The test is that the prospectus is issued, circulated or distributed in India.

What is the penalty under section 392?

The company is fined ₹1,00,000 to ₹3,00,000, plus up to ₹50,000 for every day after the first if the contravention continues. Every officer in default is fined ₹25,000 to ₹5,00,000. Imprisonment was removed from 21-12-2020.

How are charges of a foreign company registered?

Section 384(4) applies Chapter VI (registration of charges) mutatis mutandis to charges on property created or acquired by a foreign company. So the section 77 periods apply with necessary adaptations, not identically: registration within 30 days of creation. The Registrar may allow 60 days on application with additional fees, and a further 60 days on payment of ad valorem fees.

When must a foreign company follow the Companies Act as if it were an Indian company?

Under section 379(2), this applies where at least 50% of its paid-up share capital, equity or preference or both, is held by Indian citizens or Indian companies or bodies corporate, singly or together. It must then comply with the Chapter and other prescribed provisions for its Indian business.