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

Zenith Optics Inc., incorporated in Singapore, sets up a liaison office in Pune and, after establishing a place of business in India, wishes to operate as a foreign company under the Companies Act, 2013. Which of the following correctly describes the position of such a company?

Zenith Optics is a foreign company because it was incorporated outside India and has a place of business in India. Incorporation abroad plus a place of business or business activity in India is the statutory test. Setting up an office in India does not make it an Indian company.

  1. AIt is a foreign company because it is incorporated outside India and has a place of business in IndiaCorrect
  2. BIt is a foreign company only if it has a subsidiary incorporated in India
  3. CIt becomes an Indian company once it establishes a place of business in India
  4. DIt is a foreign company only if more than 50% of its shares are held by Indian residents

Explanation

A foreign company means a company or body corporate incorporated outside India which has a place of business in India, whether by itself or through an agent, physically or electronically, and conducts business activity in India in any other manner. Zenith Optics satisfies both conditions. A place of business in India does not change its country of incorporation, so it does not become an Indian company. Shareholding by Indians or having a subsidiary is not the test.

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