| Companies Incorporated Outside India: | | | | directorships, particulars of that directorship or of some |
| Right from days of East India Company foreign | | | | one of those directorships; and |
| companies were incorporating companies in India. After | | | | (ii) in the case of a body corporate, its corporate name |
| the liberalization policy Indian companies also started | | | | and registered or principal office; and the full name, |
| incorporating subsidiaries outside India. Recently many | | | | address, nationality, and nationality of origin, if different |
| foreign companies have shown interest to open | | | | from that nationality, of each of its directors; |
| branch office or liaison office to monitor their business | | | | (b) with respect to the secretary, or where there are |
| in India. In case they opt to incorporate a subsidiary | | | | joint secretaries, with respect to each of them - |
| company in India they have to follow the procedures | | | | (i) in the case of an individual, his present name and |
| given under the Companies Act, and also the | | | | surname, any former name or names and surname or |
| provisions of the act will apply in to after the company | | | | surnames, and his usual residential address; and |
| is incorporated. If a company incorporated outside India | | | | (ii) in the case of a body corporate, its corporate name |
| wish to have a place of establishment in India without | | | | and registered or principal office : |
| incorporating separate company for various reasons | | | | Provided that, where all the partners in a firm are joint |
| then it has to follow the procedures laid down in Part | | | | secretaries of the company, the name and principal |
| XI-sections 591 to 602. | | | | office of the firm may be stated instead of the |
| The Act, which has been enacted to oversee the | | | | particulars mentioned in clause (b) of this sub-section. |
| functioning of companies in India, draws heavily from | | | | (3) Clauses (2) and (3) of the Explanation to |
| the United Kingdom's Companies Acts and although | | | | sub-section (1) of section 303 shall apply for the |
| similar, is more comprehensive. The Registrar of | | | | purpose of the construction of references in |
| Companies (ROC) and the Company Law Board | | | | sub-section (2) to present and former names and |
| (CLB), both working under the Department of | | | | surnames as they apply for the purposes of the |
| Company Affairs, ensure compliance with the Act. | | | | construction of such references in sub-section (1) of |
| Sections 592 to 602 of the Companies Act of India | | | | section 303. |
| closely follows sections 406 to 423 of the English Act | | | | (4) Foreign companies, other than those mentioned in |
| barring sections 408, 416 to 418 of the act. | | | | sub-section (1), shall, if they have not delivered to the |
| Foreign Companies: | | | | Registrar before the commencement of this Act the |
| A foreign company is a company which is | | | | documents and particulars specified in sub-section (1) |
| incorporated in a country outside India under the law of | | | | of section 277 of the Indian Companies Act, 1913 (7 of |
| that other country and has a place of business in India. | | | | 1913), continue to be subject to the obligation to deliver |
| Sections 591 to 602 of the Act deal with such | | | | those documents and particulars in accordance with |
| companies. | | | | that Act. |
| Foreign Companies are of two classes namely: | | | | When any change occurs in the above particulars, the |
| Companies incorporated outside India, which have | | | | Registrar must be intimated accordingly. According to |
| established a place of business in India after April 1, | | | | section 596 any process, notice, or other document |
| 1956; and | | | | required to be served on a foreign company shall be |
| Companies incorporated outside India, which have | | | | deemed to be sufficiently served, if addressed to any |
| established a place of business in India before that | | | | person whose name has been delivered to the |
| date and continue to have an established place of | | | | Registrar under the foregoing provisions of this Part |
| business in India. | | | | and left at, or sent by post to, the address which has |
| Part XI of the Companies Act, 1956 containing Section | | | | been so delivered: |
| 591 to 608 deals with the Companies incorporated | | | | Provided that - |
| outside India i.e. a "Foreign Company." The provisions | | | | (a) where any such company makes default in |
| of this part of the Companies Act, 1956 prescribes | | | | delivering to the Registrar the name and address of a |
| that its Sections 592 to 602 shall be applicable to | | | | person resident in India who is authorized to accept on |
| Companies who are incorporated outside India which | | | | behalf of the company service of process, notice or |
| after the commencement of the Companies Act, 1956 | | | | other documents; or |
| establishes a place of business within India and | | | | (b) if at any time all the persons whose names and |
| Companies incorporated outside India having | | | | addresses have been so delivered are dead or have |
| established place of business within India prior to the | | | | ceased so to reside, or refuse to accept service on |
| commencement of the Companies Act, 1956 and | | | | behalf of the company, or for any reason, cannot be |
| continue to have the said establishment. It says that a | | | | served;a document may be served on the company |
| Company incorporated outside India and having an | | | | by leaving it at, or sending it by post to, any place of |
| established place of business in India in which 50% or | | | | business established by the company in India. |
| more paid up share capital is held by Indians then | | | | The Indian accounts have to be drawn up in Indian |
| provisions of those sections shall apply to such | | | | rupees as per the requirements of Schedule VI. |
| Companies also. | | | | Under Regulation 22 of the Companies Regulations, |
| Sections 592 to 602 applicable to such Foreign | | | | 1956 the registrar having jurisdiction over Delhi must |
| companies provide that they have to file with the | | | | maintain a Register of Foreign Companies in Form III. In |
| Registrar of Companies: | | | | that the names of foreign companies must be entered |
| Various documents giving particulars, | | | | in the order in which the documents referred to in |
| Returns regarding any alterations in the company, | | | | section 592 of the Companies Act are delivered to |
| Balance-sheet and Profit & Loss Accounts of the | | | | the Registrar. |
| company, | | | | The company has to address all communication to |
| Charges on any of the Companies' properties in India. | | | | The Registrar of Companies, NCT of Delhi and |
| It also provides that the following provisions shall apply | | | | Haryana. |
| to Indian business of a Foreign Company: | | | | Court's jurisdiction: |
| Registration of charges, | | | | The jurisdiction will be decided with reference to the |
| Right to obtain copies of and inspect the trust deed, | | | | filing of documents and information pursuant to Section |
| Books of account to be kept by the Company, | | | | 592. Clause (d) of sub-section (1) requires the foreign |
| Annual returns to be made by the Company, | | | | companies to furnish particulars about the names and |
| Inspection of books of accounts, | | | | addresses of some persons on whom notices can be |
| Power of Central Government to direct special audit, | | | | served insofar as the foreign company is concerned. |
| Audit of cost accountants, | | | | In the case of amalgamation of branch of a foreign |
| Power of Registrar to call for inspection and | | | | company in India with the transferee company |
| investigation | | | | jurisdiction of High Court for sanctioning under section |
| (Contained in Sections 124 to 145, 125, 127, 118, 209, 159, | | | | 391/394 read with section 591 and 597(1) it is the |
| 209-A,, 233-A, 233B, and 234 to 246 of the | | | | jurisdiction of registered office or place of business |
| Companies Act) | | | | which would decide the jurisdiction of any High Court |
| Section 603 of the said part XI puts certain restriction | | | | to entertain the petition for approval of amalgamation |
| on a foreign company offering documents for | | | | scheme under section 391/394 and not Delhi. [Bank of |
| subscriptions in India. | | | | Muscat S.A.O.G, In re. (2004) 60 CLA 325 (Kar.)] |
| Though under the Companies Act, 1956, no formalities | | | | Establishment of Place of Business in India- FEMA |
| are required to be carried out for a Foreign Company | | | | Requirements: |
| establishing place of business in India except the filing | | | | The Foreign Exchange Management Act, 1999(FEMA) |
| of the documents provided for in Part XI; under the | | | | has framed Regulations relating to establishing any |
| provisions of Section 29 of the Foreign Exchange | | | | place of business in India. The Foreign Exchange |
| Regulation Act, 1973 general or special permission of | | | | Management (Establishment in India of Branch or |
| the Reserve Bank of India for continuing any place of | | | | Office or other place of business) Regulations, 2000 |
| business or establishing any place of business for | | | | (Regulations) provides for establishment by a |
| carrying on activities of trade and Commercial nature | | | | non-resident any place of business, which would be a |
| by a foreign company is required. | | | | Liaison office or Project office or site office or branch |
| General: | | | | office. |
| The limit of the foreign equity in an Indian Company is | | | | In terms of the Regulation the following two points are |
| now increased up to 51% from the earlier 40%. In | | | | noteworthy: |
| certain cases 100% foreign equity participation is also | | | | No person resident outside India shall, without prior |
| now allowed. The Government of India has entered | | | | approval of the Reserve Bank establish in India any |
| into agreements with major foreign countries including | | | | place of business-be it branch or a liaison office or a |
| USA for avoiding double taxation. | | | | project office or any other business by whatever |
| Section 592 merely deals with the requirements of | | | | name called. |
| filing various documents and information with the | | | | Citizens of Pakistan, Bangladesh, Sri Lanka, |
| Registrar of Companies. The Registrar, for the | | | | Afghanistan, Iran or China cannot establish any place |
| purpose of this section, is the Registrar of Companies, | | | | of business- be it branch or a liaison office or a project |
| Delhi and also the Registrar of Companies of the | | | | office or any other business by whatever name called, |
| State in which the place of business is situated. The | | | | unless they procure RBI permission in this regard. |
| filing has to be done within 30 days of the | | | | Place of Business-what they are?: |
| establishment of the place of business. Foreign | | | | The Regulations define various place of business as |
| companies are required to file one set of documents | | | | under- |
| with the Registrar of Companies, Delhi and the other | | | | 'Liaison Office' means a place of business to act as a |
| set of documents with the Registrar of Companies of | | | | channel ofcommunication between the Principal place |
| the State in which the company has established its | | | | of business or Head Office bywhatever name called |
| place of business. Filing fee of Rs. 5000 has to be paid | | | | and entities in India but which does not undertakeany |
| only at ROC Delhi and no filing fee be paid for filing | | | | commercial /trading/ industrial activity, directly or |
| copy with the other ROC. | | | | indirectly, andmaintains itself out of inward remittances |
| If the company establishes any branch or branches of | | | | received from abroad throughnormal banking channel. |
| its business in India, no further information need be | | | | 'Project Office' means a place of business to |
| given, except that with the annual accounts the | | | | represent the interests of theforeign company |
| company should deliver three copies of a list of all its | | | | executing a project in India but excludes a Liaison |
| places of business in India and with reference to which | | | | Office. |
| the accounts are made out. | | | | 'Site Office' means a sub-office of the Project Office |
| Every foreign company must conspicuously exhibit on | | | | established at thesite of a project but does not include |
| the outside of its every office or place of business in | | | | a Liaison Office. |
| India its name ending with the words "Limited" or | | | | Thus, while a Liaison office is only a channel for |
| "Private Limited", as the case may be, if it is limited | | | | facilitating communication between the principal entity |
| company, and the country of its incorporation in English | | | | abroad and that in India, existing without any |
| as well as in the local language. | | | | commercial activity the Project office is one for |
| Where a foreign company carries on its business in | | | | executing specific projects in India. A Site office is an |
| India through an agent, the agent is required to comply | | | | extension of project office in the very site where the |
| with the provisions of this section (592). | | | | work is done. |
| A company shall be said to have a place of business | | | | "Branch office", in relation to a company means - |
| in India if it has a specified or identifiable place at which | | | | (a) any establishment described as a branch by the |
| it carries on business such as an office, store house, | | | | company; or |
| go down or other premises having some concrete | | | | (b) any establishment carrying on either the same or |
| connection between locality and its business. | | | | substantially the same activity as that carried on by |
| 594. ACCOUNTS OF FOREIGN COMPANY. | | | | the head office of the company; or |
| The provisions concerning the accounts of a foreign | | | | (c) any establishment engaged in any production, |
| company are detailed in section 594. It lays down the | | | | processing or manufacture,but does not include any |
| general obligation - once in every calendar year to | | | | establishment specified in any order made by the |
| make out a balance sheet and profit and loss account | | | | Central Government under section 8. |
| in respect of its Indian business, under the presumption | | | | Forms and Procedure: |
| that it were an Indian company, giving details also of its | | | | A person resident outside India desiring to establish a |
| subsidiaries and to deliver three copies of the | | | | branch or liaison or project office in India shall apply to |
| documents to the Registrar. When not in English, a | | | | the Reserve Bank in form FNC 1. In respect of Project |
| certified translation should also be annexed. A list of all | | | | office, the person resident outside India should have |
| places of business established by the foreign company | | | | secured from an Indian company a contract to |
| in India with reference to which the balance sheet is | | | | execute a project in India and the project is funded |
| made out should also be sent regularly. | | | | directly by a bilateral or multilateral International |
| In other words, the foreign company shall maintain | | | | Financing Agency or the project has been cleared by |
| books of accounts of its Indian business and file, every | | | | an appropriate authority or a company or entity in India |
| year, three copies of its world accounts (within nine | | | | awarding the contract has been granted term loan by |
| months from the close of the financial year), Indian | | | | a Public Financial Institute or a bank in India for the |
| business accounts (within nine months from the close | | | | project. |
| of the financial year) and a list of places of business | | | | Permitted activities: |
| established in India. | | | | Paragraph 6 of the Regulations sets out the activities |
| In respect of its Indian business, the foreign company is | | | | to be undertaken by a branch or other office in India. |
| required to maintain at its principal place of business in | | | | Schedule I of the regulations details the activities that |
| India, proper books of accounts with respect to all | | | | can be carried out by Branch and Schedule II list out |
| sums of money received and expended by the | | | | the activities that can be carried out by liaison office. |
| company and the matters in respect of which the | | | | Except when permitted by RBI, the branch or liaison |
| receipt and expenditure take place, all sales and | | | | office shall carry out no other activity, other than those |
| purchases of goods by the company, and all assets | | | | specifically permitted by these schedules. |
| and liabilities of the company | | | | As per Schedule I of the Regulations the following are |
| Where the foreign company sets up a liaison office in | | | | the permitted activities for a branch in India of a person |
| India, it shall prepare a "statement of receipts and | | | | resident outside India: |
| payments" and a "statement of assets and liabilities" | | | | Export/Import of goods |
| instead of a balance sheet and profit and loss account. | | | | Rendering professional or consultancy services. |
| These shall be in the prescribed form and shall be duly | | | | Carrying out research work, in which the parent |
| audited, the auditor giving his report as to the truth and | | | | company is engaged. |
| fairness of the receipt and payments during the | | | | Promoting technical or financial collaborations between |
| financial year | | | | Indian companies and parent or overseas group |
| The Government has granted several exemptions and | | | | company. |
| made modifications in regard to the above, in the light | | | | Representing the parent company in India and acting |
| of its general policy as to foreign companies. | | | | as buying/selling agent in India. |
| Exemptions are also given to liaison offices. Special | | | | Rendering services in Information Technology and |
| clarifications are issued in regard to foreign shipping, | | | | development of software in India. |
| airline and insurance companies and also trade and | | | | Rendering technical support to the products supplied |
| industrial activities of foreign companies | | | | by parent/group companies. |
| The documents are to be filed with the Registrar | | | | Foreign airline/shipping company. |
| within a period of nine months of the close of the | | | | In terms of Schedule II a liaison office in India of a |
| financial year of the foreign company or within such | | | | person resident outside India is permitted to carry out |
| period as extended by the Registrar not exceeding | | | | the following activities: |
| three months. | | | | Representing in India the parent company/group |
| Provisions Relating To Foreign Companies: | | | | companies. |
| (1) Foreign companies which, after the commencement | | | | Promoting export import from/to India. |
| of this Act, establish a place of business within India | | | | Promoting technical/financial collaborations between |
| shall, within thirty days of the establishment of the | | | | parent/group companies and companies in India. |
| place of business, deliver to the Registrar for | | | | Acting as a communication channel between the |
| registration - | | | | parent company and Indian companies. |
| (a) a certified copy of the charter, statutes, or | | | | Remittance of Profit or Surplus: |
| memorandum and articles, of the company or other | | | | A person resident outside India permitted by the |
| instrument constituting or defining the constitution of the | | | | Reserve Bank under Regulation 5, to establish a |
| company; and, if the instrument is not in the English | | | | branch or Project Office in India may remit outside |
| language, a certified translation thereof; | | | | India the profit of the branch or surplus of the Project |
| (b) the full address of the registered or principal office | | | | on its completion, net of applicable Indian taxes, on |
| of the company; | | | | production of the following documents, and establishing |
| (c) a list of the directors and secretary of the | | | | the net profit or surplus, as the case may be, to the |
| company, containing the particulars mentioned in | | | | satisfaction of the authorized dealer through whom the |
| sub-section (2); | | | | remittance is effected. |
| (d) the name and address or the names and | | | | For remittance of profit of a branch, -a) certified copy |
| addresses of some one or more persons resident in | | | | of the audited balance-sheet and profit and loss |
| India, authorized to accept on behalf of the company | | | | account for therelevant year;b) a Chartered |
| service of process and any notices or other | | | | Accountant's certificate certifying, -i) the manner of |
| documents required to be served on the company; | | | | arriving at the remittable profit,ii) that the entire |
| and | | | | remittable profit has been earned by undertaking |
| (e) the full address of the office of the company in | | | | thepermitted activities, andiii) that the profit does not |
| India which is to be deemed its principal place of | | | | include any profit on revaluation of the assetsof the |
| business in India. | | | | branch. |
| (2) The list referred to in clause | | | | For remittance of surplus on completion of the Project, |
| (c) of sub-section | | | | -certified copy of the final audited Project accounts;a |
| (1) shall contain the following particulars, that is to say :- | | | | Chartered Accountant's certificate showing the |
| (a) with respect to each director, - | | | | manner of arriving at the remittable surplus;income tax |
| (i) in the case of an individual, his present name and | | | | assessment order or either documentary evidence |
| surname in full, any former name or names and | | | | showing payment of income tax and other applicable |
| surname or surnames in full, his usual residential | | | | taxes, or a Chartered |
| address, his nationality, and if that nationality is not the | | | | Accountant's certificate stating that sufficient funds |
| nationality of origin, his nationality of origin, and his | | | | have been set aside for meeting all Indian tax liabilities; |
| business occupation, if any, or if he has no business | | | | andauditor's certificate stating that no statutory liabilities |
| occupation but holds any other directorship or | | | | in respect of the Project are outstanding. |