CS Shikha Mehra
Provisions Relating To Incorporation of Foreign Companies as Per Companies Act, 2013
MEANING OF 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.
OPTIONS AVAILABLE TO START BUSINESS IN INDIA THROUGH COMPANY
1. As a Company registered under Companies Act 2013 which could be Whole –owned subsidiary of Company incorporated outside India
2. As foreign company by establishing any one of the following (with the prior approval of RBI:
- Liasion Office/ Representative office
- Branch Office
- Project Office
ESTABLISHMENT OF PLACE OF BUSINESS IN INDIA
Once the entity is set up in India, then as per Companies Act 2013, they are required to get themselves registered with the Registrar of Companies (RoC)
Every foreign company shall, within thirty days of establishment of its place of business in India, in addition to the particulars specified in Section 380 of the Act, deliver to the Registrar for registration, a list of directors and Secretary of such company.
The application shall also be supported with an attested copy of approval from the Reserve Bank of India under Foreign Exchange Management Act or Regulations, and also from other regulators, if any, approval is required.
A foreign company shall, within a period of thirty days of the establishment of its place of business in India, file with the Registrar Form FC-1 .
PLACE OF BUSINESS
Statement of transfer of funds (including dividends if any) which shall, in relation of any fund transfer between place of business of foreign company in India and any other related party of the foreign company
Every foreign company shall, along with the financial statement required to be filed with the Registrar, attach thereto the following documents:
- Every foreign company shall prepare financial statement of its Indian business operations in accordance with Schedule III
- Financial Statement of foreign company.-
The documents referred to in this rule shall be delivered to the Registrar within a period of six months of the close of the financial year of the foreign company.
AUDIT OF ACCOUNTS OF FOREIGN COMPANY
Every foreign company shall get its accounts, pertaining to the Indian business operations prepared in accordance with the requirements of clause (a) of sub-section (1) of section 381 and rule 4, audited by a Practicing Chartered Accountant in India or a firm or limited liability partnership of Practicing Chartered Accountants
Every foreign company shall file with the Registrar, along with the financial statement, in Form FC 3
Section 381:
1) Every foreign company shall, in every calendar year —
a) Make out a balance sheet and profit and loss account in such form, containing such particulars and including or having annexed or attached thereto such documents as may be prescribed; and
b) Deliver a copy of those documents to the Registrar: Provided that the Central Government may, by notification, direct that, in the case of any foreign company or class of foreign companies, the requirements of clause (a) shall not apply, or shall apply subject to such exceptions and modifications as may be specified in that notification.
2) If any such document as is mentioned in sub-section (1) is not in the English language, there shall be annexed to it a certified translation thereof in the English language.
3) Every foreign company shall send to the Registrar along with the documents required to be delivered to him under sub-section (1), a copy of a list in the prescribed form of all places of business established by the company in India as at the date with reference to which the balance sheet referred to in sub-section (1) is made out.
Rule 4:
(1) For the purposes of clause (a) of sub-section (1) of section 381, every foreign company shall prepare financial statement of its Indian business operations in accordance with Schedule III or as near thereto as may be possible for each financial year including:
i. Documents required to be annexed thereto in accordance with the provisions of Chapter IX of the Act;
ii. Documents relating to copies of latest consolidated financial statements of the parent foreign company , as submitted by it to the prescribed authority in the country of its incorporation under the provisions of the law in that country:
Provided that where such documents are not in English language, there shall be annexed to it a certified translation thereof in the English language:
Provided further that where under proviso to sub-section (1) of section 381, the Central Government has exempted or prescribed different documents for any foreign company or a class of foreign companies, then documents as prescribed shall be submitted.
iii. Such other documents as may be required to be annexed or attached in accordance with sub-rule (2).
(2) Every foreign company shall, along with the financial statement required to be filed with the Registrar, annex or attach thereto the following documents:
(a) Statement of Related party transaction, which shall include:
i. Names of the person in India which shall be deemed to be the related party within the meaning of clause 76 of section 2 of the Act, of the foreign company or of any subsidiary or holding company of such foreign company or of any firm in which such foreign company or its subsidiary or holding company is a partner;
ii. Nature of such relationship;
iii. Description and nature of transaction;
iv. amount of such transaction during the year with opening ,closing, highest and lowest balance during the year and provisions made (if any) in respect of such transactions;
v. Reason of such transaction;
vi. Material effect of such transaction on both the parties;
vii. Amount written off or written back in respect of dues from or to the related parties;
viii. A declaration that such transactions were carried out at arm’s length basis;
ix. Any other details of the transaction necessary to understand the financial impact.
(b) Statement of Repatriation of profits which shall include:
i. Amount of profits repatriated during the year;
ii. Recipients of the repatriation;
iii. Form of repatriation;
iv. Dates of repatriation;
v. Details if repatriation made to a jurisdiction other than the residence of the beneficiary;
vi. Mode of repatriation; and
vii. Approval of Reserve Bank of India or any other authority, if any.
viii. Statement of transfer of funds (including dividends if any) which shall, in relation of any fund transfer between place of business of foreign company in India and any other related party of the foreign company outside India including its holding, subsidiary and associate company, include:
ix. Date of such transfer;
x. Amount of fund transferred or received;
xi. Mode of receipt or transfer of fund;
xii. Purpose of such receipt or transfer; and
xiii. Approval of Reserve Bank of India or any other authority, if any.
(3) The documents referred to in this rule shall be delivered to the Registrar within a period of six months of the close of the financial year of the foreign company to which the documents relate:
Provided that the Registrar may, for any special reason, and on application made in writing by the foreign company concerned, extend the said period by a period not exceeding three months.
Rule 5:
1. Every foreign company shall get its accounts pertaining to the Indian business operations prepared in accordance with the requirements of clause (a) of sub-section (1) of section 381 and rule 4, audited by a Practicing Chartered Accountant in India or a firm or limited liability partnership of practicing chartered accountants.
2. The provisions of Chapter X and rules made there under, as far as applicable, shall apply mutatis mutandis to the foreign company.
Rule 6
For the purposes of sub-section (3) of section 381, every foreign company shall file to the Registrar, along with the financial statement, in Form No. FC-3 along with such fee as provided in Annexure to Companies (Registration Offices and Fees) Rules, 2014 a list of all the places of business established by the foreign company in India as on the date of balance sheet.
ANNUAL RETURN OF FOREIGN COMPANIES
Every foreign company shall prepare and file, within a period of sixty days from the last day of its financial year, to the Registrar annual return in Form FC.4
Any document which any foreign company is required to deliver to the Registrar shall be delivered to the Registrar having jurisdiction over New Delhi Office where documents to be delivered and fee for registration of documents
A copy of any charter, statutes, memorandum and articles, or other instrument constituting or defining the constitution of a foreign company shall be duly certified to be a true copy Certification
Where such translation is made within India, it shall be authenticated by an advocate, attorney or pleader entitled to appear before any High Court and an affidavit, of a competent person having, in the opinion of the Registrar
Where any such translation is made outside India, it shall be authenticated by the signature and the seal of the official having custody of the original or a Notary of the country where the company is incorporated. All the documents required to be filed with the Registrar by the foreign companies shall be in English language
Authentication of translated documents
If any person trade or carry on business in any manner under any name or title or description as a foreign company registered under the Act or the rules made there under, that person or each of those persons shall, unless duly registered as foreign company under the Act and rules made there under, shall be liable for investigation under section 210 of the Act Action for improper use or description as foreign company
APPLICABILITY OF OTHER SECTIONS OF COMPANIES ACT ON FOREIGN COMPANIES
- Section 71 (Debentures)
- Section 92 (Annual Return subject to exceptions as referred above)
- Section 128 (Place of keeping Books of accounts at a place other than Registered office of Company)
- Section 77 to Section 87 (Registration of Charges)
- Section 206 to Section 229 (Inspection, Inquiry and Investigation into the affairs of Company)
PUNISHMENT FOR CONTRAVENTION (SECTION 392)
Without prejudice to the provisions of section 391, if a foreign company contravenes the provisions of this Chapter, the foreign company shall be punishable with fine which shall not be less than one lakh rupees but which may extend to three lakh rupees and in the case of a continuing offence, with an additional fine which may extend to fifty thousand rupees for every day after the first during which the contravention continues and every officer of the foreign company who is in default shall be punishable with imprisonment for a term which may extend to six months or with fine which shall not be less than twenty five thousand rupees but which may extend to five lakh rupees, or with both.
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