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

Meridian Pharma Inc., a foreign company, has a place of business in Hyderabad and invites deposits and advertises shares in India without any prospectus compliant with the Act. Which statement reflects the legal position?

The Companies Act's prospectus provisions apply to a foreign company offering securities in India, with prescribed modifications, and non-compliance attracts penalty. Being foreign gives no immunity, and FEMA applies in addition to rather than instead of the Companies Act.

  1. AThe Act's prospectus provisions do not apply since the company is foreign
  2. BThe prospectus provisions apply to a foreign company issuing a prospectus offering securities in India, subject to the prescribed modifications, and non-compliance attracts penaltyCorrect
  3. COnly FEMA applies and the Companies Act is wholly inapplicable
  4. DOnly the directors abroad are liable, and no Indian remedy exists

Explanation

The Act applies the prospectus provisions to a foreign company offering securities in India, with the prescribed adaptations, and attaches liability for non-compliance. It is wrong to say the Act is inapplicable or that FEMA alone governs; FEMA operates in addition, not in place of, the Companies Act.

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