Chapter 8 Companies Incorporated Outside India

Chapter 8 Companies Incorporated Outside India
Compiled by: Pankaj Garg

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Chapter – 8
Companies Incorporated Outside India
Table of Sections and Corresponding Rules
Chapter XXII of Companies Act, 2013 Companies (Registration of Foreign
“Companies Incorporated Outside Companies) Rules, 2014
India”
Sec. Title Rule Title

No. No.
379 Application of Act to foreign 12 Action for improper use or

companies description as foreign company
380 Documents, etc., to be 3 Particulars relating to directors

delivered to Registrar by and Secretary to be furnished to
foreign companies the Registrar by foreign
Companies
8 Office Where Documents to be

Delivered and Fee for
Registration of Documents
10 Authentication of transalated
documents
381 Accounts of foreign company 4 Financial Statement of Foreign

company

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5 Audit of Accounts of Foreign

Company
6 List of Places of Business of

Foreign Company
382 Display of name, etc., of

Foreign company
383 Service on foreign company
384 Debentures, annual return, 7 Annual Return

registration of charges, books
of account and their inspection
385 Fee for registration of

documents
386 Interpretation
387 Dating of prospectus and

particulars to be contained
therein
388 Provisions as to expert’s

consent and allotment
389 Registration of prospectus
390 Offer of Indian Depository 11 Documents to be Annexed to

Receipts Prospectus

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391 Application of sections 34 to 13 Issue of Indian Depository

36 and Chapter XX Receipts (IDRs)
392 Punishment for contravention
393 Company's failure to comply

with provisions of this Chapter
not to affect validity of
contracts, etc.
8.1 - Definitions
Foreign means any company or body corporate incorporated outside India

Company – which:
Sec. 2(42) (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.
Point to Remember
Sec. 386 of Companies Act, 2013 interpreted the expression

“Place of business” as including a share transfer or registration
office.
Accordingly, to qualify as foreign company, a company must have the

following features:
(i) It must be incorporated outside India.

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(ii) It should have a place of business in India.
(iii) Place of Business may be hold by the company directly or through

its agent.
(iv) Place of business may be physically or through electronic mode.
(v) It must conduct a business activity of any nature in India.
Meaning of Electronic Mode - Rule 2(1)(c) of Companies

(Registration of Foreign Companies) Rules, 2014
Electronic mode means carrying out electronically based, -
(a) business to business and business to consumer transactions,

data interchange and other digital supply transactions;
(b) offering to accept deposits or inviting deposits or accepting

deposits or subscriptions in securities, in India or from citizens
of India;
(c) financial settlements, web-based marketing, advisory and

transactional services, database services and products, supply
chain management;
(d) online services such as telemarketing, telecommuting,

telemedicine, education and information research; and
(e) all related data communication services,
whether conducted by e-mail, mobile devices, social media, cloud

computing, document management, voice or data transmission or
otherwise.
It is immaterial whether the main server is installed in India or

outside India.

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Important Questions
Q. No. 1: Examine with reference to the provisions of the Companies Act, 2013
whether the following companies can be treated as foreign
companies:
(i) A company incorporated outside India having a share

registration office at Mumbai.
(ii) Indian citizens incorporated a company in Singapore for the

purpose of carrying on business there. [MTP-April 18]
HINT: (i) Foreign company provided it conducts any business activity in

India. (ii) Not a foreign company as no place of business in India.
Q. No. 2: Indian citizens incorporated a company in U.K. for the purpose of

carrying on business there. Examine with reference to the relevant
provisions of the Companies Act, 2013 whether it is a “Foreign
Company”. What would be your answer in case the U.K. company was
incorporated by a company registered in India? [Nov. 08 (5 Marks)]
HINT: Not a foreign company as conditions specified in Sec. 2(42) not

fulfilled.
Q. No. 3: Examine in the light of the provisions of the Companies Act, 2013
whether the following companies can be considered as "Foreign
Companies":-
(i) A company incorporated outside India having a share

registration office at New Delhi
(ii) A company incorporated outside India having shareholders who

are all Indian citizens;
(iii) A company incorporated in India but all the shares are held by
foreigners.

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Also examine whether the above companies can issue Indian
Depository Receipts under the provisions of the Companies Act,
2013? [May 13 (8 Marks)]
HINT: (i) Foreign company provided it conducts any business activity in

India.
(ii) Not a foreign company assuming that no place of business in India.
(iii) Not a foreign company as it is being incorporated in India.
Issue of IDRs: Refer Sec. 390.
Q. No. 4: Robertson Ltd. is a company registered in Thailand. Although, it has

no place of business established in India, yet it is doing online
business through telemarketing in India. Whether it will be treated as
a Foreign Company under the Companies Act, 2013? Explain.
[Nov. 15 (4 Marks), RTP-May 18]
HINT: Foreign company as having place of business electronically and

involved in business activity through telemarketing.
Q. No. 5: In the light of the provisions of the companies Act, 2013 explain
whether the following Companies can be considered as a ‘Foreign
Company’:
(i) A Company which has no place of business established in India,

yet, is doing online business through telemarketing in India.
(ii) A company which is incorporated outside India employs agents

in India but has no place of business in India.
(iii) A Company incorporated outside India having shareholders

who are all Indian citizens. [Nov. 18-New Syllabus (8 Marks)]

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HINT: Refer Sec. 2(42) of Companies Act, 2013 and Rule 2(1)(c) of
Companies (Registration of Foreign Companies) Rules, 2014.
(i) Foreign company as it is having place of business electronically and

involved in business activity through telemarketing.
(ii) Not a foreign company as it is not having any place of business in

India.
(iii) Not a foreign company, as it is not having any place of business in

India.
Q. No. 6: In the light of the provisions of the Companies Act, 2013, examine
whether the following companies can be considered as a 'Foreign
Company':
(i) M/s Red Stone Limited is a company registered in Singapore. The

Board of Directors meets and executes business decisions at
their Board Meeting held in India.
(ii) M/s Blue Star Public Company Limited registered in Thailand has
authorized Mr. 'Y' in India to find customers and to enter
contracts with them on behalf of the Company.
(iii) M/s. Xex Limited Liability Company registered in Dubai has

installed its main server in Dubai for maintaining office
automation software by Cloud Computing for its client in India.
[Nov. 19 – New Syllabus (8 Marks)]
HINT: Refer Sec. 2(42). (i) Not a Foreign company (ii) Foreign company
(iii) Foreign company.

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8.2 - Application of Act to foreign companies [Sec. 379]
Sections • Sections 380 to 386 (both inclusive) and sections 392 and
Applicable to 393 shall apply to all foreign companies.
all foreign
• However, CG may by order exempt any class of foreign
company
companies, from any of the provisions of Sections 380 to 386
– Sec. 379(1)* and sections 392 and 393 and a copy of every such order
shall, as soon as may be after it is made, be laid before both
houses of Parliament.
Conditions for Where not less than 50% of the paid-up share capital, whether
applicability of equity or preference or partly equity and partly preference, of a
Companies Act, foreign company is held by:
2013 over (i) one or more citizens of India;
foreign
or
companies
(ii) by one or more companies or bodies corporate incorporated
-Sec. 379(2)
in India;
or
(iii) by one or more citizens of India and one or more companies

or bodies corporate incorporated in India,
whether singly or in the aggregate, such company shall comply

with the provisions of Chapter XXII (Section 379 to Sec. 393 –
Companies Incorporated outside India) 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.

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Rule 12 Action for Improper Use or Description as Foreign Company
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 thereunder, that person shall,
unless duly registered as foreign company under the Act and
rules made thereunder, shall be liable for investigation u/s
210 of the Act and action consequent upon that investigation
shall be taken against that person.
Important Questions
Q. No. 7: Trans Asia Limited is registered as a public company u/s 4(7) of the
erstwhile Companies Act, 1956 which is a subsidery of Galilio
Limited, a foreign company. Trans Asia Limited carries in business
in India describing itself as a foreign company. Can it do so? State the
actions that can be taken against the company for improper use or
description as foreign company under the provisions of the
Companies Act, 2013. [Nov. 18-Old Syllabus (4 Marks)]
HINT: Refer Rule 12 of Companies (Registration of Foreign Companies)
Rules, 2014.
8.3 - Documents, etc., to be delivered to Registrar by foreign companies [Sec.

380]
Documents Every foreign company shall, within 30 days of the establishment of

to be its place of business in India, deliver to the Registrar for
delivered - registration:
Sec. 380(1) (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.

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If the instrument is not in the English language, a certified
translation thereof in the English language.
(b) Full address of the registered or principal office of the company.
(c) List of the directors and secretary of the company containing

such particulars as may be prescribed (Rule 3).
(d) Name and address of one or more persons resident in India

authorised to accept on behalf of the company service of any
notices or other documents required to be served on the
company.
(e) Full address of the office of the company in India which is

deemed to be its principal place of business in India.
(f) Particulars of opening and closing of a place of business in India

on earlier occasion(s).
(g) Declaration that none of the directors of the company or the

authorized representative in India has ever been convicted or
debarred from formation of companies and management in
India or abroad; and
(h) Any other information as may be prescribed.
Particulars relating to directors and Secretary to be furnished

to the Registrar by foreign Companies - Rule 3(2) of the
Companies (Registration of Foreign Companies) Rules, 2014
The list of directors and secretary of the foreign company shall

contain the following particulars, for each of the persons included in
such list, namely:
(a) personal name and surname in full;

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(b) any former name(s) and surname(s) in full;
(c) father’s or mother’s name and spouse’s name;
(d) date of birth;
(e) residential address;
(f) nationality;
(g) if the present nationality is not the nationality of origin, his

nationality of origin;
(h) passport Number, date of issue and country of issue;
(i) Permanent Account Number (PAN), if applicable;
(j) occupation, if any;
(k) where directorship in held any other Indian company, Director

Identification Number (DIN), Name and Corporate Identity
Number (CIN) of such company;
(l) other directorship(s) held by him;
(m) Membership Number (for Secretary only); and
(n) e-mail ID.
Manner of filing the Documents - Rule 3(3) of the Companies

• Information to be delivered to Registrar u/s 380(1) shall be

filed in Form FC-1 along with prescribed fees.
• Application shall also be supported with an attested copy of

approval from the RBI under FEMA and also from other
regulators, if any, to establish a place of business in India.

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• If no such approval is required, a declaration from the

authorised representative shall be furnished that no such
approval is required.
Office where documents to be delivered - Rule 8 of the

• Any document which any foreign company is required to deliver

to the Registrar shall be delivered to the Registrar having
jurisdiction over New Delhi.
• If any foreign company ceases to have a place of business in

India, it shall forthwith give notice of the fact to the Registrar.
• Obligation of the company to deliver any document to the

Registrar shall cease from the date on which notice is so given,
provided it has no other place of business in India.
Authentication of Translated Documents - Rule 10 of the

• All the documents required to be filed with the Registrar by the

foreign companies shall be in English language and where any
such document is not in English language, there shall be attached
a translation thereof in English language duly certified to be
correct in the manner given in these rules.
• Where any such translation is made outside India, it shall be

authenticated by the signature and the seal, if any, of (a) the
official having custody of the original; or (b) a Notary (Public) of
the country (or part of the country) where the company is
incorporated.

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• Where such translation is made within India, it shall be

authenticated by (a) an advocate, attorney or pleader entitled to
appear before any High Court; or (b) an affidavit, of a competent
person having, in the opinion of the Registrar, an adequate
knowledge of the language of the original and of English.
Compliance Every foreign company existing at the commencement of

by existing Companies Act, 2013 shall, if it has not delivered to the Registrar,
companies the documents and particulars specified u/s 592(1) of the
- Sec. 380(2) Companies Act, 1956, continue to be subject to the obligation to

deliver those documents and particulars in accordance with that
Act, i.e. Companies Act, 1956.
Alteration Where any alteration is made in the documents delivered to the

in Registrar, the foreign company shall, within 30 days of such
Documents alteration, deliver to the Registrar for registration, a return
- Sec. 380(3) containing the particulars of the alteration in the prescribed form.
Rule 3(4) of the Companies (Registration of Foreign

Companies) Rules, 2014
Return required to be filed u/s 380(3) shall be in Form FC-2.
Important Questions
Q. No. 8: A company incorporated in Singapore has established its place of

business at Chennai. State the documents which are required to be
furnished on such establishment of business in India under the
Companies Act, 2013 and the authorities to whom such documents
are to be furnished. [May 09 (5 Marks)]

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Or
DEJY Company Limited incorporated in Singapore, desires to

establish a place of business at Mumbai. You being a practicing
Chartered Accountant has been appointed by the company as a
liaison officer, for compliance of legal formalities on behalf of the
company. Examining the provisions of the Companies Act, 2013,
state the documents you are required to furnish on behalf of the
company, on the establishment of a place of business at Mumbai.
[May 12 (8 Marks), RTP-May 19]
Or
State the documents that are required to be delivered by a foreign

company at the time of establishment of a place of business in India.
State to whom the said documents are to be delivered.
[May 14 (4 Marks)]
HINT: Refer Sec. 380(1) of Companies Act, 2013.
Q. No. 9: ABC Ltd., a foreign company having its Indian principal place of
business at Kolkata, West Bengal is required to deliver various
documents to Registrar under the provisions of the Companies Act,
2013. You are required to state, where the said company should
deliver such documents. [MTP-April 18, Oct. 19]
HINT: Registrar having jurisdiction over New Delhi (Refer Rule 8).
Q. No. 10: M/s Joel Ltd. was incorporated in London with a paid-up capital of
10 million pounds. Mr. Y an Indian citizen holds 25% of the paid-up
capital. M/s. X Ltd. a company registered in India holds 30% of the

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paid-up capital of Joel Ltd. M/s. Joel Ltd. has recently established a
share transfer office at New Delhi. The company seeks your advice
as to what formalities it should observe as a foreign company under
Companies Act, 2013.
Or
Mr. Ziyan an Indian citizen holds 25% of the paid-up capital of

Laurel Steven Limited, a company which was incorporated in
Singapore with a paid-up capital of 10 million Singapore Dollars.
Swaraj Limited a company registered in India holds 30% of the paid-
up capital of Laurel Steven Limited. Laurel Steven Limited has
recently established a share transfer office at New Delhi. The
Company seeks your advice as to what formalities it should observe
as a foreign company under the Companies Act, 20l3.
[Nov. 17 (4 Marks)]
HINT: Refer Sections 2(42), 386, 379 and 380(1).
Q. No. 11: Qinghai Huading Industrial Company Ltd., incorporated in China

established a place of business at Mumbai. The Charter/ Documents
constituting the company is in Mandarian Chinese (Chinese local
language). It is required inter alia to file a certified translation of
above Documents with the Registrar of companies in India. Who can
authenticate the translated charter/documents as per the
provisions of the Companies Act, 2013 and rules made there under
governing foreign companies in case such translation is made at
Mumbai? [May 18 – New Syllabus (2 Marks)]
HINT: Refer Rule 10.

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Q. No. 12: Transtar Limited, a company incorporated in Thailand, has a place
of business through an agent in Bangalore. The agent transacts the
business on behalf of the company through electronic mode. As
regards Transtar Limited, answer the following:
(i) Whether, Transtar Limited shall be called a foreign company

within the meaning of the Companies Act, 2013?
(ii) What are the regulatory requirements under the Companies

Act, 2013 to be complied with by a company which has
established its place of business in India with respect to
delivery of documents etc. to Registrar?
[Nov. 19 – Old Syllabus (4 Marks)]
HINT: Refer Sec. 2(42) and 380(1).
8.4 - Accounts of Foreign Company [Sec. 381]
Preparation Every foreign company shall, in every calendar year, make out a
of F.S. balance sheet and profit and loss account
- Sec. 381(1) • in such form as prescribed,
• containing such particulars as prescribed, and
• including or having attached or annexed thereto such documents

as may be prescribed,
and
deliver a copy of those documents to the Registrar.
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.

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Financial Statement of Foreign company – Rule 4 of the

Manner of Every foreign company shall prepare F.S. of its

preparation Indian business operations in accordance with
of F.S of Schedule III or as near thereto as may be possible
Indian for each financial year including:
Business (i) documents required to be annexed thereto in
Operations accordance with the provisions of Chapter IX of
the Act i.e. Accounts of Companies;
(ii) documents relating to copies of latest

consolidated F.S. 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 for the time
being in force in that country.
Additional Every foreign company shall, along with the F.S.

documents to required to be filed with the Registrar, attach
be attached thereto the following documents; namely:-
a. Statement of related party transaction
b. Statement of repatriation of profits
c. Statement of transfer of funds (including

dividends if any).
The above statements shall include such other

particulars as are prescribed in the Companies
(Registration of Foreign Companies) Rules, 2014.

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Time limit Documents shall be delivered to the Registrar

for filing within a period of 6 months of the close of the
financial year of the foreign company to which the
documents relate.
Audit of Accounts of Foreign company – Rule 5 of The

(a) Every foreign company shall get its accounts, pertaining to the
Indian business operations prepared in accordance with section
381(1) and Rule 4, shall be audited by a practicing Chartered
Accountant in India or a firm or LLP of practicing chartered
accountants.
(b) Provisions of Chapter X i.e. Audit and Auditors and rules made
there under, as far as applicable, shall apply, mutatis mutandis,
to the foreign company.
Translation If any of the document mentioned in Sec. 381(1) is not in the

in English English language, there shall be annexed to it a certified translation
language thereof in the English language.
- Sec 381(2)
List of Every foreign company shall send to the Registrar along with the
places of documents required to be delivered to him u/s 381(1), a copy of a
business in list in the prescribed form of all places of business established by
India the company in India, as at the date with reference to which the
- Sec. 381(3) balance sheet is made out.

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List of Places of Business of Foreign Company – Rule 6 of the

Every foreign company shall file with the Registrar, along with the
F.S., in Form FC-3 with prescribed fee, a list of all the places of
business established by the foreign company in India as on the date
of balance sheet.
Important Question
Q. No. 13: State briefly the requirements relating to filing of accounts with the
Registrar of Companies by the foreign company in respect of its
global business as well as Indian business.
or
Galilio Ltd. is a foreign company in Germany and it established a

place of business in Mumbai. Explain the relevant provisions of the
Companies Act, 2013 and rules made thereunder relating to
preparation and filing of financial statements, as also the
documents to be attached along with the financial statements by
the foreign company. [May 16 (4 Marks)]
HINT: Refer Section 381(1) and Rule 4.
8.5 - Display of name, etc., of foreign company [Sec. 382]
Duty to (a) Every foreign company shall exhibit on the outside of every
display name office or place where it carries on business in India,
etc. outside • the name of the company and
place of
• the country in which it is incorporated.
business

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(b) Display should be in letters easily legible
• in English characters, and
• also in the characters of the local language uses in the

locality in which the place is situated.
Duty to (a) Every foreign company shall cause
mention • the name of the company and

name etc. in
• of the country in which it is incorporated,
bills.
to be stated in all business letters, bill - heads and letter
paper, and in all notices, and other official publications of the
company.
(b) Requirements to be stated in legible English characters.
Duty to state If the liability of the members of the company is limited, every
the facts as to foreign company shall cause notice of that fact —
limited (1) to be stated in every such prospectus issued and in all business
liability of letters, bill-heads, letter paper, notices, advertisements and
members. other official publications of the company, in legible English
characters; and
(2) to be exhibited on the outside of every office or place where it
carries on business in India, in legible English characters and
also in legible characters of the local language uses in the
locality in which the office or place is situated.

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8.6 - Service on foreign company [Sec. 383]
Manner of Any notice, or other document required to be served on a foreign

service of company shall be deemed to be sufficiently served,
notice etc. • if it is addressed to any person whose name and address have
to foreign been delivered to the Registrar u/s 380 of Companies Act, 2013
company
and
• it is left at the address which has been so delivered to the

Registrar, or
sent by post to the address which has been so delivered to the
Registrar, or
sent by electronic mode.
Important Questions
Q. No. 14: X Inc is a company registered in UK and carrying on Trading
Activity, with Principal Place of Business in Chennai. Since the
company did not obtain registration or make arrangement to file
Return, the GST Officer having jurisdiction, intends to serve show
cause notice on the Foreign Company. As Standing Counsel for the
department, advise the GST Officer on valid service of notice.
[Nov. 14 (4 Marks), MTP-Aug. 18]
HINT: Notice may be served in the manner as stated u/s 383.
8.7 - Debentures, annual return, registration of charges, books of account

and their inspection [Sec. 384]
Provisions Sec. Provisions of section 71 (Issue of Debentures) shall apply

as to 384(1) mutatis mutandis to a foreign company.
debentures

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Provisions Sec. Provisions of section 92 (Preparation and filing of Annual

as to Annual 384(2) return) and Section 135 (Corporate Social
Return and Responsibility) shall, subject to such exceptions,
CSR modifications and adaptations as may be made therein
by rules made under this Act, apply to a foreign company
as they apply to a company incorporated in India.
Annual Return – Rule 7 of the Companies

Every foreign company shall prepare and file, within a

period of 60 days from the last day of its financial year, to
the Registrar annual return in Form FC-4 along with
prescribed fee, containing the particulars as they stood
on the close of the financial year.
Provisions Sec. Provisions of section 128 (Books of account, etc., to be

as to Books 384(3) kept by company) shall apply to a foreign company to the
of Account extent of requiring it to keep at its principal place of
business in India, the books of account referred to in that
section, with respect to
• monies received and spent,
• sales and purchases made, and
• assets and liabilities, in the course of or in relation to

its business in India.
Provisions Sec. Provisions of Chapter VI (Registration of Charges,

as to 384(4) Sections 77-87) shall apply mutatis mutandis to charges
registration on properties which are created or acquired by any
of Charge foreign company.

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Provisions Sec. Provisions of Chapter XIV (Inspection, inquiry and

of 384(5) investigation) shall apply mutatis mutandis to the Indian
Inspection, business of a foreign company as they apply to a
inquiry etc. company incorporated in India.
8.8 - Dating of prospectus and particulars to be contained therein [Sec. 387]
Prospectus No person shall issue, circulate or distribute in India any

to be dated prospectus offering to subscribe for securities of a company
and signed – • incorporated or to be incorporated outside India,
Sec. 387(1)
• whether the company has or has not established, or
• when formed will or will not establish, a place of business in

India,
unless the prospectus is dated and signed.
Particulars to be contained in Prospectus
(a) Prospectus must contain particulars with respect to the

following matters, namely:—
(i) the instrument constituting or defining the constitution of

the company
(ii) the enactments under which the company was

incorporated;
(iii) address in India where the said instrument, enactments, or

copies thereof, and if the same are not in the English

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language, a certified translation thereof in the English
language can be inspected;
(iv) the date on which and the country in which the company
would be or was incorporated; and
(v) whether the company has established a place of business in

India and, if so, the address of its principal office in India:
Provided that points (i), (ii) and (iii) shall not apply in the case
of a prospectus issued more than 2 years after the date at which
the company is entitled to commence business.
(b) Prospectus must state the matters specified u/s 26.
No waiver of Any condition requiring or binding an applicant for securities to

compliance waive compliance with any requirement imposed by virtue of Sec.
in 387(1) shall be void.
prospectus
- Sec. 387(2)
Form of • No person shall issue to any person in India a form of application

application for securities of such a company or intended company, unless the
for form is issued with a prospectus which complies with the
securities to provisions of this Chapter and such issue does not contravene the
be issued provisions of section 388.
along with
• However, this requirement shall not apply if it is shown that the
prospectus-
form of application was issued in connection with a bona fide
Sec. 387(3)
invitation to a person to enter into an underwriting agreement
with respect to securities.

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Exception to (a) Section 387 shall not apply to the issue, to existing members
Sec. 387 or debenture holders of a company, of a prospectus or form of
- Sec. 387(4) application relating to securities of the company, whether an

applicant for securities will or will not have the right to
renounce in favour of other persons;
(b) Section 387 (except in so far as it requires a prospectus to be

dated) shall not apply to the issue of a prospectus relating to
securities which are or are to be in all respects uniform
with securities previously issued and for the time being dealt
in or quoted on a recognised stock exchange.
Important Questions
Q. No. 15: Under section 387 of the Companies Act, 2013, what are particulars
required to be incorporated in a prospectus to be issued by an
existing foreign company?
HINT: Refer Section 387(1)
Q. No. 16: Blue Berry Ltd. is a Company incorporated outside India. 50% of its
preference share capital and 20% of its equity share capital are
held by Companies incorporated in India. It issued prospectus
inviting subscriptions in India for its share but did not state the
Country in which it is incorporated. Examine in the light of the
provisions of the Companies Act, 2013 whether the issue of
prospectus by the Company in valid.
[May 19 – Old Syllabus (2 Marks)]
HINT: Refer Sec. 387(1). Issue of prospectus is not valid as it does not
contain the particulars as prescribed u/s 387(1).

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8.9 - Provisions as to expert’s consent and allotment (Sec. 388)
Requirement No person shall issue, circulate or distribute in India any

as to Expert’s prospectus offering for subscription in securities of a company
consent • incorporated or to be incorporated outside India,
– Sec. 388(1)
• whether the company has or has not been established, or

India,—
if, where the prospectus includes a statement purporting to be

made by an expert,
(a) expert has not given his written consent to the issue of
prospectus, or
(b) expert has before delivery of the prospectus for registration

withdrawn, his written consent to the issue of the prospectus,
or
(c) there does not appear in the prospectus a statement that

expert has given and has not withdrawn his consent as
aforesaid.
Deeming A statement shall be deemed to be included in a prospectus, if it is

provision contained in any report or memorandum
- Sec. 388(2) • appearing on the face thereof or
• by reference incorporated therein or
• issued therewith.

Page 27
8.10 - Registration of Prospectus (Sec. 389)
Conditions No person shall issue, circulate or distribute in India any

for issue or prospectus offering for subscription in securities of a company
circulation of • incorporated or to be incorporated outside India,
prospectus
• whether the company has or has not established, or
– Sec. 389
India,
unless before the issue, circulation or distribution of the

prospectus in India,
(a) a copy thereof certified by the chairperson of the company and

two other directors of the company as having been approved
by resolution of the managing body has been delivered for
registration to the Registrar, and
(b) the prospectus states on the face of it that a copy has been so
delivered, and
(c) there is endorsed on or attached to the copy, any consent to

the issue of the prospectus required by section 388 and such
documents as may be prescribed.
Documents to be Annexed to Prospectus – Rule 11 of the

The following documents shall be annexed to the prospectus,

namely:

Page 28
(a) any consent to the issue of the prospectus required from any
person as an expert;
(b) a copy of contracts for appointment of managing director or

manager and in case of a contract not reduced into writing, a
memorandum giving full particulars thereof;
(c) a copy of any other material contracts, not entered in the

ordinary course of business, but entered within preceding 2
years;
(d) a copy of underwriting agreement; and
(e) a copy of power of attorney, if prospectus is signed through

duly authorized agent of directors.
Important Questions
Q. No. 17: Chang Limited, a company incorporated in Singapore proposes to

issue prospectus offering its securities in India. The Company has
no established place of business in India.
The officer in charge of the issue of the prospectus in India seeks

your opinion regarding the provisions relating to registration of
the prospectus under the Companies Act, 2013. List out the
documents required to be enclosed with the prospectus.
[May 18 – Old Syllabus (4 Marks)]
HINT: Refer Section 389 and Rule 11 of the Companies (Registration of

Foreign Companies) Rules, 2014.

Page 29
8.11 - Other Provisions (Sec. 390, 391, 392 & 393)
Offer of IDRs Central Government may make rules for:
– Sec. 390 (a) the offer of IDR;
(b) the requirement of disclosures in prospectus or letter of offer

issued in connection with IDRs;
(c) the manner in which the IDRs shall be dealt with in a

depository mode and by custodian and underwriters; and
(d) the manner of sale, transfer or transmission of IDRs,
by a company incorporated or to be incorporated outside India,

whether the company has or has not established, or will or will
not establish, any place of business in India.
Issue of Indian Depository Receipts (IDRs) – Rule 13 of the

For the purpose of section 390, no company incorporated or to be

incorporated outside India, whether the company has or has not
established, or may or may not establish, any place of business in
India shall make an issue of IDRs unless it complies with the
• conditions mentioned under this rule,
• SEBI (ICDR) Regulations, 2009 and
• any directions issued by the RBI.
Application of The provisions of Sections 34 to 36 (both inclusive) shall apply to

sections 34 to (a) the issue of a prospectus by a company incorporated outside
36 and India u/s 389 as they apply to prospectus issued by an Indian
Chapter XX - company;
Sec. 391
(b) the issue of Indian Depository Receipts by a foreign company.

Page 30
Subject to the provisions of Sec. 376, the provisions of Chapter
XX (Winding up) shall apply mutatis mutandis for closure of
the place of business of a foreign company in India as if it were
a company incorporated in India in case such foreign company
has raised monies through offer or issue of securities under
this Chapter which have not been repaid or redeemed.
Punishment If a foreign company contravenes the provisions of this Chapter,

for (a) the foreign company shall be punishable with
contravention
• fine which shall not be less than Rs. 1 lakh but which may
- Sec. 392
extend to Rs. 3 lakhs and
• in the case of a continuing offence, with an additional

fine which may extend to Rs. 50,000 for every day after
the first during which the contravention continues and
(b) every officer of the foreign company who is in default shall

be punishable with imprisonment for a term which may
extend to 6 months or with fine which shall not be less than
Rs. 25,000 but which may extend to Rs. 5 lakhs or with both.
Company’s (a) Any failure by a company to comply with the provisions of

failure to this Chapter shall not affect
comply with • the validity of any contract, dealing or transaction entered
provisions of into by the company or
this Chapter
• its liability to be sued in respect thereof.
not to affect
validity of (b) The company shall not be entitled to bring any suit, claim any
contracts, etc. set-off, make any counter-claim or institute any legal
- Sec. 393 proceeding in respect of any such contract, dealing or
transaction, until the company has complied with the
provisions of this Act applicable to it.

Page 31
Important Questions
Q. No. 18: In case, a foreign company does not deliver its documents to the
Registrar of Companies as required u/s 380 of the Companies Act,
2013, state the penalty prescribed under the said Act, which can be
levied. [RTP-May 18]
Or
Ronnie Coleman ltd., a foreign company failed to deliver some

documents to the Registrar of Companies as required under section
380 of the companies Act, 2013. State the provisions of penalty
prescribed under the Act, which can be levied on Ronnie Coleman
Ltd. for its failure to deliver the documents.
[Nov. 18-New Syllabus (2 Marks)]
HINT: Refer Section 392.
----------------------

Page 32
Scanner of Past Exam Questions – New Syllabus
Attempt Q. Topic Suggested Answer Marks

No. / Hints*
May 18 6(b) Practical Illustration on Rule 10 Refer Q. No. 11 2
Nov. 18 3(b) Determining status of foreign Refer Q. No. 5 8

company
6(b) Penalty for failure to deleiver the Refer Q. No. 18 2

documents
May 19# No Question asked 0
Nov. 19# 3(a) Determining status of foreign Refer Q. No. 6 8

company
May 20
Nov. 20
May 21
Nov. 21
*detailed answers are given in Practice Manual cum Scanner.

#From May 2019 exam, questions are covered only for Descriptive Part of Paper.
--------------------------

Page 33
NOTES
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Page 34

Chapter 8 Companies Incorporated Outside India

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Chapter 8 Companies Incorporated Outside India

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Chapter 8 Companies Incorporated Outside India

Compiled by: Pankaj Garg

Chapter XXII of Companies Act, 2013 Companies (Registration of Foreign

“Companies Incorporated Outside Companies) Rules, 2014

Sec. Title Rule Title

379 Application of Act to foreign 12 Action for improper use or

380 Documents, etc., to be 3 Particulars relating to directors

8 Office Where Documents to be

381 Accounts of foreign company 4 Financial Statement of Foreign

Compiled by: Pankaj Garg

5 Audit of Accounts of Foreign

6 List of Places of Business of

382 Display of name, etc., of

383 Service on foreign company

384 Debentures, annual return, 7 Annual Return

385 Fee for registration of

387 Dating of prospectus and

388 Provisions as to expert’s

389 Registration of prospectus

390 Offer of Indian Depository 11 Documents to be Annexed to

Compiled by: Pankaj Garg

391 Application of sections 34 to 13 Issue of Indian Depository

392 Punishment for contravention

393 Company's failure to comply

Foreign means any company or body corporate incorporated outside India

(b) conducts any business activity in India in any other manner.

Sec. 386 of Companies Act, 2013 interpreted the expression

Accordingly, to qualify as foreign company, a company must have the

(i) It must be incorporated outside India.

Compiled by: Pankaj Garg

(iii) Place of Business may be hold by the company directly or through

(iv) Place of business may be physically or through electronic mode.

(v) It must conduct a business activity of any nature in India.

Meaning of Electronic Mode - Rule 2(1)(c) of Companies

Electronic mode means carrying out electronically based, -

(a) business to business and business to consumer transactions,

(b) offering to accept deposits or inviting deposits or accepting

(c) financial settlements, web-based marketing, advisory and

(d) online services such as telemarketing, telecommuting,

(e) all related data communication services,

whether conducted by e-mail, mobile devices, social media, cloud

It is immaterial whether the main server is installed in India or

Compiled by: Pankaj Garg

(i) A company incorporated outside India having a share

(ii) Indian citizens incorporated a company in Singapore for the

HINT: (i) Foreign company provided it conducts any business activity in

Q. No. 2: Indian citizens incorporated a company in U.K. for the purpose of

HINT: Not a foreign company as conditions specified in Sec. 2(42) not

(i) A company incorporated outside India having a share

(ii) A company incorporated outside India having shareholders who

Compiled by: Pankaj Garg

HINT: (i) Foreign company provided it conducts any business activity in

(ii) Not a foreign company assuming that no place of business in India.

(iii) Not a foreign company as it is being incorporated in India.

Issue of IDRs: Refer Sec. 390.

Q. No. 4: Robertson Ltd. is a company registered in Thailand. Although, it has

[Nov. 15 (4 Marks), RTP-May 18]

HINT: Foreign company as having place of business electronically and

(i) A Company which has no place of business established in India,

(ii) A company which is incorporated outside India employs agents

(iii) A Company incorporated outside India having shareholders

Compiled by: Pankaj Garg

(i) Foreign company as it is having place of business electronically and