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

Zephyr Textiles Inc., incorporated in Vietnam, sets up a liaison office in Surat and later establishes a place of business in India through which it carries on business. Under the Companies Act, 2013, which of the following correctly describes the status of Zephyr Textiles Inc.?

Zephyr Textiles Inc. is a foreign company. The Companies Act treats a company incorporated outside India that has a place of business in India, and carries on business activity here, as a foreign company. Indian shareholding or operating location does not change that status.

  1. AIt is a foreign company because it is incorporated outside India and has a place of business in IndiaCorrect
  2. BIt is an Indian private company because it operates in Surat
  3. CIt is a foreign company only if it has at least 50% Indian shareholding
  4. DIt is a company limited by guarantee registered 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. Shareholding pattern does not decide foreign company status, so the 50% option is wrong.

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