Introduction: Navigating the intricacies of the Companies Act, 2013, foreign companies find relief in Section 379. This provision strategically exempts them from various compliance obligations, fostering an investor-friendly environment. To qualify for this exemption, a foreign company must meet specific criteria related to its shareholding structure. In essence, if less than fifty percent of its paid-up share capital is held by Indian citizens, companies, or bodies corporate, the foreign entity enjoys exemption from certain provisions. This article delves into the nuances of Section 379, shedding light on the exemption criteria and its role in promoting foreign investments in India.
Are you a foreign company under the companies act, 2013? If yes, then you are not required to comply the provisions under the Companies Act, 2013 after satisfying the condition mentioned in the section 379 of the Companies Act, 2013. The section 379 has been introduced and essential for the inviting the prospect investment from the foreign companies for the development of economy and employment generation in the economy. The said definition of the foreign company and the provision of section 379 has been discussed in the latter part of this article.
Meaning of the Foreign Company:
Section 2(42) “foreign company” means any company or body corporate incorporated outside India which:
(a) has a place of business in India whether by itself or through an agent, physically or through electronic mode; and
(b) conducts any business activity in India in any other manner.
Meaning of Section 379 (Application of Companies Act to foreign companies)
The provision of the Sections 380 to 386 and sections 392 and 393 shall apply to all foreign companies registered under the Act.
However, any other provision under the Companies Act, 2013 shall not apply to the company, Where less than fifty per cent of the paid-up share capital, whether singly or in the aggregate, whether equity or preference or partly equity and partly preference, of a foreign company is held by the persons as follows:
1. one or more citizens of India or
2. by one or more companies or bodies corporate incorporated in India, or
3. by one or more citizens of India and one or more companies or bodies corporate incorporated in India,
such company shall comply with the provisions of this Chapter and such other provisions of this Act as may be prescribed with regard to the business carried on by it in India as if it were a company incorporated in India.
It means the applicability of the Companies Act, 2013 shall be evaluated by the the shareholding criteria. Any foreign company is not required to comply the provisions of the Companies Act, 2013 except provision of the Sections 380 to 386 and sections 392 and 393 shall apply to all foreign companies registered under the Act, if 50% or more of the paid up share capital is not held by the one or more citizen of India or any body corporate or companies registered in India or by any one or more citizens of India and one or more companies or bodies corporate incorporated in India.
Hence, the Foreign company qualifying the above conditions is not required to comply any of the provision of the Companies Act, 2013 which has been applicable to other companies such as Beneficial owner, Annual filing and so on. This section can be seen as one of the essential element in promoting the foreign investment in the Indian market.
Conclusion: Section 379 of the Companies Act, 2013 emerges as a pivotal enabler for foreign companies eyeing Indian markets. By offering exemption from certain provisions when specific shareholding criteria are met, it streamlines compliance for foreign entities. This strategic move not only attracts foreign investments but also simplifies the regulatory landscape for businesses incorporated outside India. As the Indian economy welcomes global players, Section 379 stands as a testament to the nation’s commitment to creating a conducive environment for foreign investors. For foreign companies aligning with the stipulated criteria, navigating the Indian regulatory framework becomes a smoother journey, encouraging economic development and fostering global collaborations.