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

Nordic Textiles AS, a Norwegian company, has a place of business in Surat. Its paid-up share capital is held 40% by Indian citizens and 15% by an Indian company, the rest by foreigners. What is the legal position under the Companies Act, 2013?

The company must comply as if it were an Indian company because Indian citizens and Indian companies together hold 55%, which meets the 50% threshold in aggregate. The holdings of citizens and bodies corporate are added, and the capital may be equity or preference.

  1. AIt must comply with the Chapter on foreign companies and prescribed provisions as if it were an Indian company, since Indian holding is 55%Correct
  2. BIt is exempt, because the Indian holding is below the required majority of 75%
  3. CIt need comply only if Indian citizens alone hold at least 50%
  4. DIt need comply only if the Indian holding is entirely in equity shares

Explanation

Section 379(2) applies where not less than 50% of paid-up capital, equity or preference, is held by Indian citizens and/or Indian bodies corporate, singly or in aggregate. Here 40% + 15% = 55%, so it qualifies. Option 3 is wrong because citizens and companies are aggregated.

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