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

Winding Up of Foreign Companies under the Companies Act, 2013

Updated 11 October 2026 · Fact-checked

A foreign company that has carried on business in India and then stops can be wound up as an unregistered company under section 376, even if its home country has dissolved it. Sections 339 to 341 add personal liability of persons behind fraudulent conduct of business. Answer by stating the provision, applying the facts and concluding.

Understand Winding Up of Foreign Companies

A foreign company is a body corporate incorporated outside India that has a place of business in India. It is not registered under the Companies Act, 2013 as an Indian company. So when it fails, the Act treats it as an unregistered company for winding up.

Section 376 is the key rule. If a body corporate incorporated outside India has been carrying on business in India and ceases to carry on business here, it may be wound up as an unregistered company under this Part. This is so even if it has been dissolved, or has otherwise ceased to exist, under the laws of its home country. The reason is simple: Indian creditors and contributories should not lose their remedy because the home country dissolved the company.

Section 375 gives the working rules for unregistered companies. All the winding up provisions of the Act apply, with the exceptions in that section. The most important exception: no unregistered company can be wound up voluntarily. Only winding up by the Tribunal is available. The grounds are: the company is dissolved, has ceased to carry on business, or carries on business only to wind up its affairs; it is unable to pay its debts; or the Tribunal thinks it just and equitable.

Section 391(2) links this to closure of the place of business. Subject to section 376, Chapter XX applies, with necessary changes, to closure of the place of business of a foreign company in India as if it were an Indian company. This applies where the foreign company has raised money through offer or issue of securities under that Chapter, and the money has not been repaid or redeemed.

Sections 339 to 341 deal with fraudulent conduct of business during winding up. They let the Tribunal make people personally liable without limit. They apply to winding up in general, so they can be used in a winding up of an unregistered or foreign company too.

Key rules to remember

Section 376 rule: Foreign body corporate carried on business in India + ceases to carry on business in India → may be wound up as an unregistered company; Applies even if it has been dissolved or has ceased to exist under its home country's law.
No voluntary winding up (section 375(2)): Unregistered company → winding up by Tribunal only; Voluntary winding up is not allowed for any unregistered company.
Grounds under section 375(3): (a) dissolved / ceased business / business only to wind up affairs; (b) unable to pay debts; (c) just and equitable; Learn all three. Ground (c) needs the Tribunal's opinion.
Inability to pay debts: creditor demand (section 375(4)(a)): Debt exceeding ₹1,00,000 then due + written demand served + 3 weeks of neglect to pay, secure or compound; The amount must exceed one lakh rupees. It is not 'one lakh or more'.
Inability to pay debts: suit against member (section 375(4)(b)): Suit against a member for company debt + written notice served on company + no action within 10 days; Company must pay, secure or compound the debt, get the suit stayed, or indemnify the defendant.
Other deemed inability (section 375(4)(c), (d)): Execution on a decree or order returned unsatisfied in whole or in part; or otherwise proved to the Tribunal; Four modes in all.
Fraudulent conduct (section 339(1)): Business carried on with intent to defraud creditors or others, or for any fraudulent purpose → Tribunal may declare directors, managers, officers and knowing parties personally responsible without limit of liability; Applicants: Official Liquidator, Company Liquidator, any creditor or contributory. The Tribunal 'may', so it is discretionary.
Criminal consequence (section 339(3)): Every person knowingly a party → liable for action under section 447; Section 339 applies even if the person is punishable under another law (section 339(4)).
Extension to firms and companies (section 341): Declaration or order against a firm or body corporate → Tribunal may also act against its partners or directors at the relevant time; Covers declarations under section 339 and orders under section 340.

How to solve Winding Up of Foreign Companies questions

Use this method for any question on winding up of a foreign company or on liability for fraudulent conduct.

1Identify the entity. Is it incorporated outside India and has it carried on business in India? If yes, treat it as an unregistered company for winding up.
2State the basic rule of section 376: it can be wound up even if dissolved in its home country, once it has ceased to carry on business in India.
3Check the mode. Voluntary winding up is barred for unregistered companies under section 375(2). Only the Tribunal can wind it up.
4Match the facts to a ground under section 375(3): ceased business, inability to pay debts, or just and equitable. For debts, test the deemed-inability rules in section 375(4), including the amount above ₹1,00,000 and the three-week period.
5If the facts show fraud on creditors, bring in section 339. Name who can apply, who can be held liable and what the Tribunal may declare. Add section 341 if a firm or company is involved.
6Add any link to closure of place of business under section 391(2) if the company raised money by securities that are not repaid.
7Write a clear conclusion that answers the exact question asked.

Quickest way: Four-line answer frame

When to use it: Use when time is short and the question asks whether a foreign company can be wound up or who is liable.

Line 1: Foreign company that carried on business in India and ceased = unregistered company, section 376.
Line 2: Dissolution at home is no bar. No voluntary winding up, section 375(2); Tribunal only.
Line 3: Ground and test, for example debt above ₹1,00,000, demand, three weeks, section 375(4).
Line 4: If fraud, section 339 personal liability without limit, extended by section 341; then conclude.

Common mistakes in Winding Up of Foreign Companies

Saying a foreign company cannot be wound up in India because it is dissolved in its home country.
Students assume Indian law follows the home country's status.
Fix: Quote section 376: it may be wound up notwithstanding dissolution or ceasing to exist under home law.
Allowing voluntary winding up of a foreign company.
Students apply the rules for registered companies.
Fix: Remember section 375(2): no unregistered company can be wound up voluntarily.
Applying section 376 to a foreign company that is still carrying on business in India.
The word 'ceases' is missed.
Fix: Check the condition: the body corporate must have carried on business in India and ceased to do so.
Writing the debt limit as 'one lakh or more' or giving a wrong waiting period.
Numbers are memorised loosely.
Fix: Learn: sum exceeding ₹1,00,000, demand served, three weeks for the creditor demand; ten days for the notice of suit against a member.
Saying section 339 liability is automatic or limited.
Students ignore the words 'may' and 'without any limitation of liability'.
Fix: The Tribunal has discretion and acts on an application by the Official Liquidator, Company Liquidator, creditor or contributory. Once declared, liability is personal and unlimited as the Tribunal directs.
Forgetting that section 341 reaches partners and directors of a firm or body corporate.
Students stop at the officers of the company itself.
Fix: Add section 341 when the person held liable is a firm or company; the Tribunal can also reach its partners or directors at the relevant time.

Worked examples

Example 1

Zenith Corp, incorporated in country X, ran a sales office in Pune for several years and then closed it. Its home country later dissolved it. Indian creditors are owed money. Can Zenith Corp be wound up in India? Can it opt for voluntary winding up?

Show the solution

Zenith Corp is a body corporate incorporated outside India and it carried on business in India.
It has ceased to carry on business in India.
Under section 376, such a body may be wound up as an unregistered company even though it has been dissolved or has ceased to exist under the laws of its home country.
Under section 375(2), no unregistered company can be wound up voluntarily, so only winding up by the Tribunal is possible.
A ground exists under section 375(3)(a): the company is dissolved or has ceased to carry on business.

Answer: Yes, Zenith Corp can be wound up in India as an unregistered company under section 376 despite its home dissolution. It cannot opt for voluntary winding up; only the Tribunal can order it.

Example 2

A foreign company with a place of business in Mumbai owes a creditor ₹3,50,000, which is due. The creditor serves a written demand at the company's principal place of business. The company does nothing for four weeks. Is the company deemed unable to pay its debts? Separately, what further remedy does the creditor have if the business was run to defraud creditors?

Show the solution

As an unregistered company, the test is section 375(4)(a).
The debt is ₹3,50,000, which exceeds ₹1,00,000, and it is then due.
The creditor served a written demand by leaving it at the principal place of business, which is a valid mode of service.
The company neglected to pay, secure or compound for more than three weeks after service; four weeks have passed.
So all conditions are met and the company is deemed unable to pay its debts, a ground under section 375(3)(b).
If it appears in the winding up that business was carried on with intent to defraud creditors or for a fraudulent purpose, a creditor may apply to the Tribunal under section 339(1).
The Tribunal may, if it thinks proper, declare directors, managers, officers and persons knowingly party to the fraud personally responsible without limit for the debts it directs. Section 341 allows the same against partners or directors of a firm or body corporate held liable.

Answer: Yes, the company is deemed unable to pay its debts and can be wound up by the Tribunal. If fraud is shown, the creditor can apply under section 339 for a declaration of unlimited personal liability of those responsible, and those knowingly party are also liable for action under section 447.

Exam tips

Begin with section 376 and its exact condition: carried on business in India, then ceased. Examiners look for it.
Always state that voluntary winding up is not available to unregistered companies (section 375(2)).
Write the numbers exactly: above ₹1,00,000, three weeks, ten days.
For fraud questions, name the applicants, the persons liable and the effect, then add section 341 and section 447.
Close every answer with a one-line conclusion tied to the facts given.

Practice questions from Corporate Entities - Companies

Winding Up of Foreign Companies in other exams

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

Winding Up of Foreign Companies: frequently asked questions

Can a foreign company be wound up in India if it is dissolved in its home country?

Yes. Section 376 says a body corporate incorporated outside India that carried on business in India and has ceased to do so may be wound up as an unregistered company. This holds even if it has been dissolved or has ceased to exist under its home law.

Can a foreign company be wound up voluntarily?

No. Section 375(2) states that no unregistered company shall be wound up voluntarily under the Act. Winding up has to be by the Tribunal.

What is the difference between sections 339 and 340?

Section 339 covers liability for fraudulent conduct of business, where the Tribunal can declare persons personally responsible without limit. Section 341 applies both section 339 declarations and section 340 orders to partners or directors of a firm or body corporate. Section 340 itself is not in the text for this page, so learn it from your study material.

Who can apply to the Tribunal under section 339?

The Official Liquidator, the Company Liquidator, or any creditor or contributory of the company can apply. The Tribunal acts only if it thinks it proper to do so.