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CS Professional · Strategic Management and Corporate Finance · Foreign Funding - Instruments, Laws and Procedures

A foreign company has paid-up share capital made up of equity and preference shares. Under the Companies Act, 2013, when must it comply with the Chapter on foreign companies and other prescribed provisions as if it were an Indian company?

The company must comply as if it were an Indian company when not less than fifty per cent of its paid-up share capital, equity or preference, is held by Indian citizens or Indian-incorporated bodies corporate, singly or in aggregate. This is the test in section 379(2).

  1. AWhen at least fifty per cent of its paid-up share capital is held by Indian citizens or Indian-incorporated bodies corporate, singly or togetherCorrect
  2. BWhen more than seventy-five per cent of its paid-up capital is held in India
  3. CWhen any Indian citizen holds shares in it
  4. DWhen it has raised funds in India for the first time

Explanation

Section 379(2) applies where not less than fifty per cent of the paid-up share capital, equity or preference or both, is held by Indian citizens or Indian bodies corporate, singly or in aggregate. Then the company must comply as if incorporated in India for its Indian business. The seventy-five per cent figure and the 'any holding' test are not in the section.

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