Foreign Companies as per the Companies Act, 2013
Foreign company means any company or body corporate incorporated outside India which has a place of business in India whether by itself or through agent, physically or through electronic mode and conduct any business activity in India in any other manner. As per Company Act 2013, a company having Share transfer office or share registration office in India will also be considered as foreign company.
The foreign subsidiary or joint venture companies will have to comply with consolidation of accounts even for associate company.
SERVICE OF DOCUMENTS ON FOREIGN COMPANY
As per Sec 383 of the Companies Act, 2013 Any notice or other document required to be served on a foreign company shall be deemed to be sufficiently served, if addressed to any person whose name and address have been delivered to the Registrar and left at or sent by post to the address which has been so delivered to the Registrar or by electronic mode.
REGISTRATION OF CHARGES:
A foreign company has to file the documents containing the particulars of a charge within 30 days from the date of the creation of charge with the principal registrar as well as the registrar of the state in which the principal place of the business of the company is situated.
Where the charge is created or the completion of the acquisition of the property which takes place outside India, 30 days after the day on which, the instrument creating or evidencing the charge or copy thereof could, in due course of post and if dispatched with due diligence, have been received in India shall be the time available to file the charge with the Registrar.
A foreign company is also under an obligation to provide inspection and copies of trust deed recording the creation of a charge for securing any issue of debentures to the debenture holders.
EFFECT OF NON-COMPLIANCE OF OBLIGATIONS:
If a foreign company fails to comply with any of the obligation posed upon by the companies the company shall not be entitled to bring any suit, claim any set off, make any counter-claim or institute any legal proceeding in respect of any contract, dealing or transaction.
But non-compliance would not affect the validity of such contracts. If any foreign company fails to comply with any of the foregoing provisions of this act, the company and every officer or agent of the company who is in default shall be punishable with fine which may extend to ten thousand rupees and in the case of a continuing offence, with an additional fine which may extend to one thousand rupees for every day during which the default continues.
CROSS BORDER MERGER
Merger of an Indian company into a foreign company or merger of a foreign company into Indian company is possible only with the prior approval of the Reserve Bank of India and only with certain prescribed countries. The consideration payable to the shareholders of the merging company can be in cash, depository receipts or partly in cash & partly in Depository Receipts.
CONCLUSION
Amendments introduced in the provisions of Foreign Company with the intention to increase the scope of such companies and have also increased the compliances for them. The need for physical presence has been done away in the new act as entities with no physical presence, having any virtual presence would also be covered in the category of the foreign company.
The foreign subsidiary or joint venture companies will have to comply with consolidation of accounts even for associate company.
As per Sec. 379 of the Companies Act 2013, If 50% or more of the paid up share capital (whether equity or preference or partly equity and partly preference) of a foreign company is held by following then they will be considered as foreign company.
- One or more Indian citizens or
- One or more companies or bodies corporate incorporated in India or
- One or more Indian citizens and one or more bodies corporate incorporated in India.
The foreign company shall in respect of its Indian business comply with Chapter XXII of the Companies Act 2013 and such other provisions of the Act as may be prescribed by CG as if it were a company incorporated in India.
FILLING OF FINANCIAL STATEMENT WITH REGISTRAR
After commencement of this act, the foreign company shall establish a place of business in India and within 30 days of establishment, it will deliver to the registrar the following documents:
FILLING OF FINANCIAL STATEMENT WITH REGISTRAR
After commencement of this act, the foreign company shall establish a place of business in India and within 30 days of establishment, it will deliver to the registrar the following documents:
- A certified copy of the charter, statutes or memorandum and articles, of the company or other instrument constituting or defining the constitution of the company and if the instrument is not in the English language, a certified translation in the English language is also required.
- The full address of the registered or principal office of the company.
- A list of the directors and secretary of the company containing such particulars as may be prescribed.
- The name and address or the names and addresses of one or more persons resident in India authorized to accept on behalf of the company service of notices or other documents required to be served on the company.
- The full address of the office of the company in India which is deemed to be its principal place of business in India.
Following additional particulars in each respect need to be furnished:
- For Director:
- In the case of an individual, his present name and surname in full, any former name or names and surname name in full, his usual residential address, his nationality and his business occupation or if he has no business occupation but holds any other directorship or directorships, particulars of that directorship or of some one of those directorships.
- In the case of a body corporate, its corporate name, registered or principal office and the full name, address, nationality of each of its directors.
- For secretary or where there are joint secretaries with respect to each of them-
- In the case of an individual, his present name and surname, any former name and surname, and his usual residential address.
- In the case of a body corporate, its corporate name and registered or principal office name. Provided that, where all the partners in a firm are joint secretaries of the company, the name and principal office of the firm may be stated.
Where any alteration is made in name and address of person resident in India then foreign company shall, within thirty days of such alteration, deliver to the Registrar for registration, a return containing the particulars of the alteration in the prescribed form.
Where any alteration is made in the Constitution, Registered or principal office, Director and Secretary then a return containing the particulars of the alteration in the prescribed form need to be filled with Registrar before 31 January of following year.
ACCOUNTS OF A FOREIGN COMPANY
Section 594 of Companies Act 2013 requires a foreign company to maintain books of accounts of its India and world business and three copies it has to be mandatory filed with the ROC every year within 9 months from the closure of the financial year.
These accounts should be accompanied by a list of place of businesses in India. In respect of the Indian business of the foreign company the Profit and loss account, balance sheet and other accounting record should be prepared in Indian currency, should comply with the provisions of Schedule VI and shall be audited by a CA practicing in India.
For world accounts contents includes Balance sheet, Profit and loss account, documents relating to every subsidiary. For forms of Balance sheet, Profit and loss account same provisions apply to the foreign company as are applicable to a company incorporated in India. If the world accounts are not in the English language, a certified translation in English shall be annexed.
DISPLAY OF NAME AND OTHER INFORMATION OF FOREIGN COMPANY
It is duty to exhibit the following particulars outside place of business, on bills, letters etc.:
Where any alteration is made in the Constitution, Registered or principal office, Director and Secretary then a return containing the particulars of the alteration in the prescribed form need to be filled with Registrar before 31 January of following year.
ACCOUNTS OF A FOREIGN COMPANY
Section 594 of Companies Act 2013 requires a foreign company to maintain books of accounts of its India and world business and three copies it has to be mandatory filed with the ROC every year within 9 months from the closure of the financial year.
These accounts should be accompanied by a list of place of businesses in India. In respect of the Indian business of the foreign company the Profit and loss account, balance sheet and other accounting record should be prepared in Indian currency, should comply with the provisions of Schedule VI and shall be audited by a CA practicing in India.
For world accounts contents includes Balance sheet, Profit and loss account, documents relating to every subsidiary. For forms of Balance sheet, Profit and loss account same provisions apply to the foreign company as are applicable to a company incorporated in India. If the world accounts are not in the English language, a certified translation in English shall be annexed.
DISPLAY OF NAME AND OTHER INFORMATION OF FOREIGN COMPANY
It is duty to exhibit the following particulars outside place of business, on bills, letters etc.:
- The name of the foreign company.
- The country of foreign company.
- The fact that the liability of members is limited.
- Conspicuously exhibited in letters easily legible in English characters and legible characters of one of the local languages.
SERVICE OF DOCUMENTS ON FOREIGN COMPANY
As per Sec 383 of the Companies Act, 2013 Any notice or other document required to be served on a foreign company shall be deemed to be sufficiently served, if addressed to any person whose name and address have been delivered to the Registrar and left at or sent by post to the address which has been so delivered to the Registrar or by electronic mode.
REGISTRATION OF CHARGES:
A foreign company has to file the documents containing the particulars of a charge within 30 days from the date of the creation of charge with the principal registrar as well as the registrar of the state in which the principal place of the business of the company is situated.
Where the charge is created or the completion of the acquisition of the property which takes place outside India, 30 days after the day on which, the instrument creating or evidencing the charge or copy thereof could, in due course of post and if dispatched with due diligence, have been received in India shall be the time available to file the charge with the Registrar.
A foreign company is also under an obligation to provide inspection and copies of trust deed recording the creation of a charge for securing any issue of debentures to the debenture holders.
EFFECT OF NON-COMPLIANCE OF OBLIGATIONS:
If a foreign company fails to comply with any of the obligation posed upon by the companies the company shall not be entitled to bring any suit, claim any set off, make any counter-claim or institute any legal proceeding in respect of any contract, dealing or transaction.
But non-compliance would not affect the validity of such contracts. If any foreign company fails to comply with any of the foregoing provisions of this act, the company and every officer or agent of the company who is in default shall be punishable with fine which may extend to ten thousand rupees and in the case of a continuing offence, with an additional fine which may extend to one thousand rupees for every day during which the default continues.
CROSS BORDER MERGER
Merger of an Indian company into a foreign company or merger of a foreign company into Indian company is possible only with the prior approval of the Reserve Bank of India and only with certain prescribed countries. The consideration payable to the shareholders of the merging company can be in cash, depository receipts or partly in cash & partly in Depository Receipts.
CONCLUSION
Amendments introduced in the provisions of Foreign Company with the intention to increase the scope of such companies and have also increased the compliances for them. The need for physical presence has been done away in the new act as entities with no physical presence, having any virtual presence would also be covered in the category of the foreign company.
Foreign Companies as per the Companies Act, 2013
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