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

Zephyr Holdings, incorporated abroad, has 60% of its paid-up share capital (equity and preference together) held by Indian citizens and Indian companies, and it carries on business in India. Which statement is correct under Section 379?

Zephyr must comply with the relevant Chapter and prescribed provisions of the Act for its Indian business as if it were an Indian company. Section 379(2) applies when at least fifty per cent of paid-up capital, equity or preference, is Indian-held, so foreign incorporation is disregarded.

  1. AIt must comply with Chapter provisions and prescribed provisions of the Act for its Indian business as if it were an Indian companyCorrect
  2. BIt is wholly exempt from the Act because it is incorporated abroad
  3. CIt is treated as Indian only if equity shares alone are held by Indians
  4. DIt must comply only if Indian holding is 100%

Explanation

Section 379(2) applies where not less than fifty per cent of paid-up share capital, equity or preference or both, is held by Indian citizens and/or Indian-incorporated bodies, singly or together. At 60% the test is met, so the company complies as if incorporated in India for its Indian business. The foreign incorporation does not shield it.

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