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CS Professional · Environmental, Social and Governance (ESG) - Principles and Practice · Legislative Framework of Corporate Governance in India

Orion Corp., incorporated in Dubai, has 60% of its paid-up share capital (equity and preference together) held by Indian citizens and Indian companies. It does business in India. What follows under the Act?

The company must comply with the Chapter and other prescribed provisions for its Indian business as if it were an Indian company, because Indian citizens and companies together hold at least fifty per cent of its paid-up share capital under section 379(2).

  1. ANothing special, since foreign incorporation exempts it from all Indian company law
  2. BIt must comply with the Chapter and other prescribed provisions regarding its Indian business as if it were an Indian companyCorrect
  3. CIt must be wound up immediately as an unregistered company
  4. DIt must comply only if Indian citizens alone, not companies, hold the shares

Explanation

Under section 379(2), where not less than fifty per cent of paid-up capital is held by Indian citizens or Indian bodies corporate, singly or in aggregate, the foreign company must comply as if it were incorporated in India for its Indian business. Here 60% exceeds 50%. Holdings of citizens and companies may be combined, so the last option is wrong.

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