Setting Up of Business, Industrial and Labour Laws · Corporate Entities - Companies

Foreign Companies and Application of the Companies Act

Updated 11 October 2026 · Fact-checked

A foreign company (section 2(42)) is a company incorporated outside India with a place of business in India. Sections 380 to 386, 392 and 393 apply to all of them. Under section 379(2), if at least 50% of paid-up share capital is held by Indian citizens or Indian bodies corporate, it must comply as if Indian.

Understand Foreign Companies and Application of the Act

A foreign company, as defined in section 2(42), is a body corporate incorporated outside India that has a place of business in India or conducts business activity in India. Indian law needs a way to supervise such a company. Chapter XXII of the Act does this. It does not make the company Indian. It makes the company register, disclose, keep accounts and display its name.

Section 379 has two parts. Sub-section (1) says sections 380 to 386 (both inclusive) and sections 392 and 393 apply to all foreign companies. This is the baseline. You do not need any Indian shareholding to trigger it.

Sub-section (2) is the stricter rule. Where not less than fifty per cent of the paid-up share capital, whether equity or preference or partly both, is held by one or more Indian citizens, or by one or more companies or bodies corporate incorporated in India, or by both, singly or in aggregate, the foreign company must comply with this Chapter and such other provisions of the Act as may be prescribed, for the business it carries on in India, as if it were a company incorporated in India. This is in addition to the baseline.

The idea is simple. A company that is mostly Indian-owned should not escape Indian rules just because it was incorporated abroad. Note that the test looks at paid-up capital (equity and preference together) and counts Indian citizens and Indian-incorporated bodies together.

The Chapter then lists the main duties. Section 380: file documents with the Registrar within thirty days of setting up a place of business. Section 381: yearly accounts. Section 382: display of name. Section 384: debentures, annual return, charges, books of account. Section 391 (prospectus and IDRs) is also in Chapter XXII, but it is not in the list of sections in section 379(1), so read it as a separate provision. Section 234 separately deals with mergers with foreign companies.

Key rules to remember

Section 379(1) - baseline application: Sections 380 to 386 (both inclusive) + sections 392 and 393 → apply to ALL foreign companies; No shareholding test is needed for this. Section 391 is not in this list.
Section 379(2) - Indian-held foreign company: Indian citizens + Indian-incorporated companies/bodies corporate hold ≥ 50% of paid-up share capital (equity + preference) → comply as if an Indian company; Applies to the business carried on in India, and to such other provisions as may be prescribed. It is in addition to the baseline in section 379(1).
Section 380(1) - filing on setting up: Deliver prescribed documents to Registrar within 30 days of establishing place of business in India; Includes charter or MOA and AOA, registered office address, list of directors and secretary, an authorised person resident in India, address of principal place of business in India, past opening or closing particulars, and a declaration on convictions or debarment.
Section 380(3) - alterations: Alteration in delivered documents → return to Registrar within 30 days; Filed in the prescribed form.
Section 381 - accounts: Every calendar year: balance sheet + profit and loss account in prescribed form; copy to Registrar; Non-English documents need a certified English translation. A list of all places of business in India goes along. The Central Government may relax this by notification.
Section 382 - display of name: Name + country of incorporation: outside every office, and on letters, billheads, notices and publications; Outside offices, also in the local language. If liability is limited, that fact must also be stated.
Section 384 - other provisions applied: s.71 (debentures), s.92 (annual return) and s.135 (CSR), s.128 (books of account), Chapter VI (charges), Chapter XIV (inspection, inquiry and investigation); Sections 92 and 135 apply subject to exceptions, modifications and adaptations made by rules. Books of account are kept at the principal place of business in India and cover the Indian business only. Chapter XIV applies mutatis mutandis to the Indian business.
Section 391 - prospectus, IDRs, closure: ss.34 to 36 apply to prospectus under s.389 and to IDRs; Chapter XX applies mutatis mutandis to closure if raised monies are unpaid; Closure rule is subject to section 376.

How to solve Foreign Companies and Application of the Act questions

Use this order for any question on foreign companies. It keeps your answer in the provision, facts, conclusion format.

1Check whether the entity is incorporated outside India and has a place of business in India. If yes, it is a foreign company for this Chapter.
2State section 379(1): sections 380 to 386 and 392, 393 apply to all foreign companies.
3Test section 379(2). Add up shares held by Indian citizens and Indian companies or bodies corporate. Use paid-up capital, equity plus preference together.
4Compare with 50%. At 50% or more, the company must, in addition to the baseline, comply with the Chapter and such other provisions of the Act as may be prescribed, as if it were Indian, for its Indian business. Below 50%, the section 379(1) baseline still applies, but there is no Indian-company treatment.
5Name the specific duty the question is about: section 380 filing, 381 accounts, 382 display, 384 other provisions, 391 prospectus or closure.
6Apply the time limit or condition to the facts, for example 30 days from establishing the place of business.
7Write a clear conclusion in one line, with the section cited.

Quickest way: The 50% paid-up capital check

When to use it: Use when the question gives shareholding figures and asks if the foreign company is treated as an Indian company.

Write total paid-up capital (equity plus preference).
Add holdings of Indian citizens and Indian companies or bodies corporate.
Divide by total paid-up capital. If the result is 50% or more, section 379(2) applies.
Write: baseline sections 380 to 386, 392, 393 always apply; at 50% or more, section 379(2) adds compliance with the Chapter and prescribed provisions as if an Indian company, for the Indian business.

Common mistakes in Foreign Companies and Application of the Act

Saying a foreign company becomes an Indian company whenever it has an Indian place of business.
Students mix the baseline rule in section 379(1) with the 50% rule in section 379(2).
Fix: Say the baseline sections apply to all. Only at 50% or more Indian holding does the company comply as if Indian.
Treating the test as 'more than 50%'.
Students remember 'majority'.
Fix: The text says 'not less than fifty per cent'. Exactly 50% qualifies.
Counting only equity shares or only individuals.
Quick reading of the section.
Fix: Count equity and preference paid-up capital together, and count Indian citizens as well as Indian companies and bodies corporate, singly or in aggregate.
Stating the filing time as 60 or 90 days.
Confusion with other filing deadlines in the Act.
Fix: Section 380(1) gives thirty days from establishing the place of business. Alterations also need a return within thirty days.
Forgetting the translation and name-display rules.
Students focus only on section 379.
Fix: Remember sections 380(1)(a) and 381(2) for certified English translations, and section 382 for name display in English and local language.
Saying books of account cover the foreign company's global business.
Students overlook the limiting words in section 384(3).
Fix: Books are kept at the principal place of business in India and relate to the business in or in relation to India.

Worked examples

Example 1

Zephyr Inc., incorporated in the USA, has set up a liaison office in Pune. Its paid-up capital is ₹100 crore: equity ₹80 crore and preference ₹20 crore. Indian citizens hold equity of ₹30 crore and preference of ₹5 crore. An Indian company holds equity of ₹15 crore. Is Zephyr Inc. required to comply as if it were an Indian company?

Show the solution

Provision: Section 379(2) requires a foreign company to comply as if it were Indian where not less than 50% of its paid-up share capital, equity or preference, is held by Indian citizens or Indian companies or bodies corporate, singly or in aggregate.
Total paid-up capital = ₹80 crore + ₹20 crore = ₹100 crore.
Indian holding = ₹30 crore + ₹5 crore (citizens) + ₹15 crore (Indian company) = ₹50 crore.
Percentage = 50 ÷ 100 × 100 = 50%.
Analysis: 50% is not less than 50%, so the test is met.

Answer: Yes. Indian holding is exactly 50%, which satisfies 'not less than fifty per cent'. Under section 379(2) Zephyr Inc. must comply with Chapter XXII and the other prescribed provisions for its Indian business as if it were an Indian company. Sections 380 to 386, 392 and 393 apply in any case under section 379(1).

Example 2

Nordic AB, a Swedish company with no Indian shareholders, opens an office in Chennai on 1 July. State its main filing obligations under the Companies Act, 2013.

Show the solution

Provision: Section 379(1) applies sections 380 to 386 and 392, 393 to all foreign companies. No Indian shareholding is needed.
Section 380(1): within thirty days of establishing the place of business, i.e. by 31 July, deliver to the Registrar a certified copy of its charter or memorandum and articles (with certified English translation if needed), address of its registered or principal office, list of directors and secretary, name and address of a person resident in India authorised to accept service, address of its principal place of business in India, past opening or closing particulars, and the declaration on convictions or debarment.
Section 380(3): any later alteration must be filed within thirty days.
Section 381: each calendar year, prepare a balance sheet and profit and loss account in the prescribed form, deliver a copy to the Registrar, with the list of places of business in India.
Section 382: display its name and country of incorporation outside the Chennai office and on business letters, billheads and notices, and state limited liability if applicable.

Answer: Nordic AB is a foreign company covered by section 379(1). It must file the section 380 documents with the Registrar by 31 July, report alterations within thirty days, file annual accounts under section 381, and comply with the name-display rules in section 382. It is not treated as an Indian company, because section 379(2) is not met.

Exam tips

For short notes on section 379, write both sub-sections: the baseline (380 to 386, 392, 393) and the 50% rule.
In case-study questions, compute the percentage first and show the arithmetic before concluding.
Learn the list in section 380(1) in order. Examiners often ask for the documents to be delivered.
Use the exact phrases 'not less than fifty per cent' and 'as if it were a company incorporated in India'.
Link to related provisions when relevant: section 391 for prospectus and IDRs, section 234 for mergers with foreign companies, section 376 for winding up.

Practice questions from Corporate Entities - Companies

Foreign Companies and Application of the Act in other exams

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

Foreign Companies and Application of the Act: frequently asked questions

What is a foreign company under the Companies Act, 2013?

It is a company or body corporate incorporated outside India that has a place of business in India. Chapter XXII applies to such companies. For section 234 mergers, the Explanation defines it more widely as any company incorporated outside India, whether or not it has a place of business in India.

When is a foreign company treated as an Indian company?

Under section 379(2), when not less than fifty per cent of its paid-up share capital is held by Indian citizens or Indian companies or bodies corporate, singly or together. It then complies with the Chapter and other prescribed provisions for its Indian business as if it were an Indian company.

Within what time must a foreign company file documents with the Registrar?

Within thirty days of establishing its place of business in India, under section 380(1). Any alteration in those documents must be filed within thirty days under section 380(3).

Do foreign companies have to file accounts in India?

Yes. Section 381 requires a balance sheet and profit and loss account every calendar year in the prescribed form, with a copy delivered to the Registrar. The Central Government may modify or exempt this by notification.