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

Zephyr Fashions Inc., incorporated in Italy, sets up a liaison office in Mumbai and begins to conduct business in India through a place of business there. Under the Companies Act, 2013, what is the legal position regarding its status?

Zephyr Fashions is a foreign company. The Companies Act, 2013 defines a foreign company as one incorporated outside India which has a place of business in India, itself or through an agent, and conducts business activity in India. Incorporation in Italy prevents it from being an Indian company.

  1. AIt is a foreign company, since it is incorporated outside India and has a place of business in IndiaCorrect
  2. BIt is an Indian company, since it carries on business in India
  3. CIt is a private company registered in India automatically
  4. DIt is not a foreign company until it files a prospectus in India

Explanation

A foreign company is one incorporated outside India that 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. Zephyr satisfies both elements. Being incorporated in Italy, it cannot be an Indian company, and no prospectus is needed for it to be a foreign company.

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