Foreign Companies- Few Important Aspects Including FDI, Rules on Names, Notary, Apostillation And Consularisation

At the outset, the recent changes w.r.t. the running of business in India, it includes the start-ups are getting recognition, the MSMEs are getting their dues clear due to the stringent payment norms issued by Government of India, launching of SPICe plus and so on. The prominent and very diversified source to start the business is to incorporate the Company. Besides having separate legal entity from its promoters, it has a lot of its own characteristics.

FOREIGN DIRECT INVESTMENT (FDI):

The Foreign direct investment (FDI) in India is a major monetary source for the India’s economic development. The Foreign Companies invest in India due to various reasons which includes:

  • International recognition
  • Expansion of business
  • Earning more profits
  • Global Leadership and many more.

The concept of ease of doing business is launched by the Government of India. There are many reasons that this concept is yielding results, one of the major reason is that the quantum of FDI is also increasing. Many foreign Companies are investing in India at such a big level. According to the Department for Promotion of Industry and Internal Trade (DPIIT), the total FDI inflows (‘Equity inflows’, ‘Re-invested earnings’ and ‘Other capital’) into India during second quarter of financial year 2019-20 stood at Rs. 113,511 Crore.

Going forward, we will have a look on the important rules related to incorporation of Foreign Company in India. The Companies Act, 2013 read with the Companies (Incorporation) Rules, 2014 framed and issued by Ministry of Corporate Affairs.

A Foreign Company can either be registered as a Private Limited or a Public Limited. In General, a foreign company is a company which is incorporated outside India but having its place of business in India.

As per Section 2 (42) of Companies Act, 2013, Foreign company is a company or body corporate incorporated outside India which

  • has a place of business in India whether by itself or through an agent, physically or through electronic mode; and
  • conduct any business activity in India in any other manner

RULES ON NAME OF FOREIGN COMPANY:

  • As per rule 8 of the Companies(Incorporation) Rules, 2014 (“hereinafter referred to as the Rules”) states that if a foreign company is incorporating its subsidiary company in India, then the original name of the holding company as it is may be allowed with the addition of word India or name of any Indian State or city, if otherwise available:

Provided further that provisions of rule 8 shall apply mutatis mutandis while determining whether a proposed name is too nearly resembling the name of a company or limited liability partnership incorporated outside India.

  • The name shall be considered undesirable, if the proposed name implies association or connection with an embassy or consulate of a foreign government;
  • The proposed name includes name of any foreign country or any city in a foreign country, the same shall be allowed if the applicant produces any proof of significance of business relations with such foreign country like memorandum of understanding with a company of such country:

Provided that the name combining the name of a foreign country with the use of India like India Japan or Japan India shall be allowed if, there is a government to government participation or patronage and no company shall be incorporated using the name of an enemy country.

RULES ON NOTARY, APOSTILLATION AND CONSULARISATION:

Rule 13(5) classified the Foreign Countries into three categories as enumerated in the table for which attestation of documents is required to be done as per the country of origin.

As per rule 13(5)(a), where subscriber to the memorandum is a foreign national residing outside India, there is a need to attest the documents of proposed subscribers as per the manner indicated below:

Rule Type of Country Text of Rule Type of Attestation
13(5)(a) Applies to Commonwealth Countries In a country in any part of the Commonwealth, his signatures and address on the memorandum and articles of association and proof of identity shall be notarized by a Notary (Public) in that part of the Commonwealth.  

 

 

 

Notary (Public)

13(5)(b) Applies to Hague Apostille Convention Countries in a country which is a party to the Hague Apostille Convention, 1961, his signatures and address on the memorandum and articles of association and proof of identity shall be notarized before the Notary (Public) of the country of his origin and be duly apostillised in accordance with the said Hague Convention.  

 

 

 

Notary (Public)

+

Apostillation

13(5)(c) Applies to a Country outside the Commonwealth and Hague Apostille Convention his signatures and address on the memorandum and articles of association and proof of identity, shall be notarized before the Notary (Public) of such country and the certificate of the Notary (Public) shall be authenticated by a Diplomatic or Consular Officer empowered in this behalf under section 3 of the Diplomatic and Consular Officers (Oaths and Fees) Act, 1948 (40 of 1948) or, where there is no such officer by any of the officials mentioned in section 6 of the Commissioners of Oaths Act, 1889 (52 and 53 Vic.C.10), or in any Act amending the same;  

 

 

 

 

Notary (Public) +  Consularisation

(Authentication of such Notary(Public) by Diplomatic or Consular Officer )

RULES ON VISA:

The rule 13(5)(c) states that where subscriber to the memorandum is a foreign national residing outside India and visited in India and intended to incorporate a company, in such case, the incorporation shall be allowed if, he/she is having a valid Business Visa.

The proof of such visa along with the arrival stamps shall be required and the same shall be annexed in SPICe form at the time of incorporation.

Explanation- For the purposes of this clause, it is hereby clarified that, in case of Person is of Indian Origin or Overseas Citizen of India, requirement of business Visa shall not be applicable. 

Disclaimer:  This article contains interpretation of the Act, Rules, Regulations, Notifications issued and personal views of the author are based on such interpretation. Readers are advised either to cross check the views of the author with the Act or seek the expert’s views if they want to rely on contents of this article. I assume no responsibility therefore. This is only a knowledge sharing initiative and author has no intention to solicit any business or profession.

About Author: The above has been compiled by CS Varun Kapoor, proprietor of V Kapoor & Associates, Practicing Company Secretary from Rohini, New Delhi. For any queries or suggestions, he can be approached at pcsvarunkapoor@gmail.com

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