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CA Intermediate · Corporate and Other Laws · Companies Incorporated Outside India

Aryan Textiles Ltd is an Indian company. A foreign company, Bell Corp (UK), has a place of business in India. Aryan holds 30% of Bell Corp's paid up share capital, and Bell Corp's remaining shares are held by non-resident persons. Is Bell Corp subject to the Companies Act, 2013 rules on foreign companies?

Bell Corp is a foreign company and the foreign company provisions apply. It is incorporated in the UK and has a place of business in India. Aryan's 30% stake is below the 50% Indian holding level that would attract additional provisions, so shareholding does not change its status.

  1. ANo, because an Indian company holds part of its capital
  2. BNo, because 70% of its capital is held by non-residents
  3. CYes, because it is incorporated outside India and has a place of business in India; shareholding does not change its statusCorrect
  4. DYes, but only if Aryan Textiles holds at least 51% of its capital

Explanation

The status of a foreign company depends on incorporation outside India plus a place of business in India, not on who owns the shares. The Act has a separate rule treating a foreign company with 50% or more of paid up capital held by Indian citizens or Indian companies as subject to the provisions applying to companies incorporated in India, so the 30% holding is below that and does not alter status.

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