Company Law

PROJECT
ON
Foreign Company
BY : TO:
Porush Jain Dr. Rita Ghial
Roll No. : 209/19
B.Com.LL.B(Hons)-D
Sem. : 8th
 Acknowledgment

I would like to express my gratitude to my Company Law teacher Dr. Rita, and to the Director ,
Dr. Rajinder Kaur , for providing me with the opportunity to do this project and to do research
on the topic – Foreign Company. This project has helped me a lot in doing research and I got to
learn many new things from it about the topic and the subject. I also want to thank my teacher ,
friends and family to help in doing this project .

I hope this project serves it purpose and is worthwhile to all the readers

Porush Jain
Index
Sr. No. Particular Page Number
1. Introduction 4
2. Kinds of Company 5-8
3. Foreign Company 9-11
4. Complaisance of Provision 11-16
5. Standard Charted Bank 17-18
6. References 19
Introduction
The word “company” is derived from the combination of two latin words namely, Com and
Panis, Com means “Together” and Panis means “Bread” Thus, initially the word refered to an
association of person who took their meal together. The merchants in leisurely past, took
advantage of these festive gatherings together their business matter. Intially it doesn’t have any
technical or legal meaning.

The term “company” is “a group of individuals organized for the purpose of achieving a
common goal.” A company is a legally recognized mutual organization of individuals with a
distinctive name and common seal, established to do business for profit, with capital divisible
into transferable shares, limited liability, a corporate entity, and perpetual succession.

A company is a natural legal entity formed by the association and group of people to work
together towards achieving a common objective. It can be a commercial or an industrial
enterprise. Different types of companies are taxed differently; therefore, the taxation of the
company defines its type.

The word company connotes two ideas in legal sense,

1. The members of the association are so numerous that it cannot aptly be described as a
firm or partnership and
2. A member may transfer his interest in the association without the consent of others
members.

Such an association may be incorporated according to law whereupon it become a body

corporate or what is usually called a corporation with perpetual succession and a common seal.

According to the definition of a company by the Indian Company Act 2013;

‘‘A registered association which is an artificial legal person, having an independent legal, entity
with perpetual succession, a common seal for its signatures, a common capital comprised of
transferable shares and carrying limited liability.’’

Lord Justice Lindely, defined Company as “ An Association of many people who contribute
money or money’s worth to common stock and employ it for a common purpose”.
Kinds of Company
On the basis of Incorporation:

Statutory Company

A statutory company is formed by an Act enacted by the legislature of the nation or state. The
powers, obligations, liabilities, objects, scope, and so on of such a corporation are specifically
specified by the provisions of the Act that defines it. The Reserve Bank of India (RBI), the Life
Insurance Corporation of India Act, and so on is examples of statutory corporations. These
companies are usually formed to administer enterprises that are socially or nationally important.

Registered Company

Companies that are listed under the Companies Act are referred to as registered companies. The
Registrar of Companies also issues a certificate of incorporation to companies. The majority of
firms in the field of production and services are registered companies. The establishment,
operation, and continuation of such a company shall be subject to the applicable Company act
provisions.

On the basis of Liability:

Company Limited by Shares

Section 2(22) of the Companies Act, 2013 mentions these kinds of companies. The owners of
such a corporation are liable for the amount of shares that remain outstanding. This liability
against the retained shares may be called to the authority’s attention. If a shareholder or
participant has paid for the security, he or she is no longer liable for anything else. The
responsibility can be applied at any time during the company’s lifetime, even during the course
of winding up. A company limited by shares may be a public company or a private company.

Company Limited by Guarantee

Section 2(21) of the Company Act, 2013 mentions these forms of companies. When the liability
of a company is covered by the guarantee, that ensures that the members of the company agreed
to the Memorandum of Association to reimburse the same amount during the winding up of the
company. The members’ liability of such companies is restricted to the undertaking provided by
them. Trust research organizations, for example, are examples of businesses whose liability is
constrained by promise. Such companies are not founded for the sake of profit, but rather to
promote art, technology, athletics, trade, and cultural events. These companies may or may not
have a share capital. It can be a public or private company if it has a share capital.

Unlimited Liability Company

It is a kind of company that is mentioned in Section 2(21) of the Companies Act, 2013. Where
the members’ liability is not capped, the company is referred to as an unlimited liability
company. A member of such a corporation is liable for the company’s debts in relation to his
stake in it. After passing a special resolution for conversion and applying to the Registrar of
Companies for enrollment as a limited partnership, such a company may be turned into a limited
liability company.

On the basis of Members:

Private Company

Private companies, as specified in Section 3(1)(b) of the Companies Act, 2013, are rather
restrictive in nature, as they can limit the freedom to transfer shares in their Articles of
Association. A company of this kind could have a maximum of 50 members. These companies’
shares and debentures are not open to the general public. The number of shareholders required
for a company to be deemed a private company is two, and it is explicitly stated that two
members collectively owning a single share shall be counted as one shareholder, not two. The
‘Pvt. Ltd.’ at the end of a company’s name makes it possible to identify it as a private company.

Public Company

According to Section 2(71) of the Companies Act of 2013, public companies are those that are
not private. A public company must have at least 7 directors, as required by Section 3(1)(a) of
the Companies Act, 2013. The right to transfer shares and debentures in a public company to the
general public is inherent in the nature of the public company.

On the basis of Control:

Holding Company

Under Section 2(46) of the Companies Act, 2013, a holding company is defined as a parent
company that owns and manages the management and membership of the Board of Directors of
another company (i.e. a subsidiary company)
Subsidiary Company

A subsidiary company is described as one that is owned by another company with more than 51
percent of its overall share capital and is controlled by another company under Section 2 (87) of
the Companies Act, 2013.

Associate company

These Companies, as specified by Section 2(6) of the Companies Act, 2013, are those on which
the other company has a considerable impact, but they are not branches of such influencing
companies, known as the Associate Company. Examples of such associate companies are Joint
Venture Companies. Major influence can be derived clearly from the clarification added to the
clause requiring the influencing company to own 20% of the share capital or other arrangement
by which the decision making of the associate is imposed on that Influencing Company.

On the basis of different Aspects:

One Man Company

A one-man company is one in which one person owns almost all of the company’s share capital
and certain dummy names are used to fulfill the legal provision of a minimum number of
shareholders. The dummy names that are included are usually family or associates of the primary
shareholder. A one-man company is a separate legal body from its owners. In statute, a company
is similar to a natural being and has its own legal body. And if he owns all of the shares, the
shareholder is not a company. He and no other shareholder of the company have any legitimate
or equitable right in the company’s assets.

Not-for-Profit Company

Non-for-profit companies are those that do not generate profits for their members. Any revenue
generated or donated to a not-for-profit company is used to further the organization’s goals and
keep it going. Not-for-profit organizations are typically tax-funded charities or other forms of the
voluntary service company, and as such, they are excluded from paying certain taxes. Money is
not assigned to members, directors, or officers of a nonprofit company.

Investment Company

Investment Companies, as described in Section 186 of the Companies Act of 2013, are
companies that conduct a primary activity or trade involving the shares of other companies.
Securities can be in the form of shares, debentures, or other securities issued by the company.
The term investment, in its most common sense, means to buy capital and retain it for the
purpose of earning interest on it; however, in the case of an investment firm, the purchase is
directed not only at acquisition and holding but also at the sale of shares once they hit a higher
price. These companies are dependent on the trend in the stock market and analyze the
company’s maximum investment gains. The commonly practiced stock market terms related to
the bear and bull market and the trend’s interpretation play a key role in achieving company-
oriented benefit.

On the basis of Domicile:

Domestic or Indian Company

Indian Company has been defined as any company registered under the Companies Act of 2013
or any other prior law known as Indian Company in accordance with Section 2(20) of the
Companies Act, 2013. An Indian company may use its office address to demonstrate its locus
Standi, while the law includes guidelines for an Indian company to meet while using its forces.

Foreign Company

A foreign company is described under Section 2 (42) of the Companies Act, 2013 as one that is
located outside of India but has a registered address in India, which may be physical or
electronic, or one that is owned by the company itself or by its agents, officials, or managers.
Giants such as Whirlpool of India Ltd., Timex Group India Ltd., Ambuja Cements Ltd., etc are
some of the examples of foreign companies.
Foreign Company
Foreign Company as per Section 2(42) of Company Act, 2013 means any company or body
corporate incorporated in 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.

As per Company Act, 1956 section 592 (1) states that foreign companies shall mean the
following two classes of companies:

1. companies incorporated outside India which, after the commencement of the Old Act,
establish a place of business within India; and
2. Companies incorporated outside India which have, before the commencement of the
Old Act, established a place of business within India and continue to have an
established place of business within India at the commencement of the Old Act.

In order to be considered a ‘foreign company’, one has to fulfill both the abovementioned
criteria. Hence, this new act definition has a wider scope compared to the earlier Act. To fully
appreciate the scope of the definition, it is necessary to define the terms ‘electronic mode’ as
well as ‘business activity’.

To get the understanding of Foreign Company one need to understand the concept of Electronic
Record and Business Activity.

The term 'electronic mode' is defined under the Companies (Specification of Definitions Details)
Rules, 2014 with regard to a company (as given under Rule 2(h) and Rule 2 (1)(c) of Companies
'Registration of Foreign Companies' Rules, 2014). In accordance with the aforementioned
sections, electronic mode may include all transactions that have an electronic or digital base,
including –

a. Business to business and business to consumer transactions

b. Data exchange
c. Digital supply transactions
d. All online services
 e. Data communication services (through mobile, email, social media, cloud computing,
etc.)

This definition clearly states that even if the location of the main server is outside India, it would
still come within the purview of the term ‘electronic mode. Hence leaving no ambiguity in its
interpretation and increase the ambit of definition of Foreign Company.

Impact of New Definition of Foreign Company under

Companies Act 2013
• Companies Act 2013 has expanded the scope of the definition of Foreign Company.

• Under the Companies Act 2013 need for physical presence has been done away with, as the
company or body corporate incorporated outside India with no physical presence yet having
virtual presence are covered under new definition of Foreign Company under Companies Act
2013.

• Companies in media and broadcasting business like Zee Entertainment Enterprise Limited
which have foreign subsidiaries like Asia Today Limited which render satellite services to the
group will now be covered under the new definition of Foreign Company under Companies Act
2013.

• Indian Asset Management Companies with foreign subsidiaries in countries like Singapore and
Mauritius making investments in Indian securities or Indian mutual funds will now be covered
under the new definition of Foreign Company under Companies Act 2013.

• Online travel companies with joint venture with several airlines selling tickets of those airlines
on their online portal will now be covered under new definition of Foreign Company under
Companies Act 2013.

• Company or Body Corporate providing online coaching to Indian students will now be covered
under new definition of Foreign Company under Companies Act 2013.

• Airline companies who operate through their booking agents in India will now be covered
under new definition of Foreign Company under Companies Act 20131

1
https://blog.ipleaders.in/foreign-company-compliance-overview
Compliance Provisions
Section 380 to 385 of Companies Act, 2013 contain various provision which are applicable to
the foreign companies. The foreign companies are bound to follow these provisions. If a foreign
company fails to comply with these provisions, it will be liable to be sued in respect of any
contract, dealing or transaction which it may have entered into others.

Section 380 states that Documents, etc., to be delivered to Registrar by foreign companies.—
(1) Every foreign company shall, within thirty days of the establishment of its place of business
in India, deliver to the Registrar for registration—

(a) 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 and, if the instrument is not
in the English language, a certified translation thereof in the English language;

(b) the full address of the registered or principal office of the company;

(c) a list of the directors and secretary of the company containing such particulars as may be
prescribed;

(d) the name and address or the names and addresses of one or more persons resident in India
authorised to accept on behalf of the company service of process and any notices or other
documents required to be served on the company;

(e) the 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 or
occasions;

(g) declaration that none of the directors of the company or the authorised 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 prescribed2.

2
Section 380 of Company Act, 2013
 eForm FC-2 , Section 380(1) (a) to (h) and Rule 3(3) of the Companies (Registration of
Foreign Companies) Rules, 2014 required the following

Filing requirements:

A foreign company shall file the particulars of the principal place of business in e-form FC-1
within 30 days of establishment of place of business in India along with the required documents
to RoC, Delhi.

The Registrar of the corresponding state shall have access to these documents filed with the RoC,
Delhi.

 Stamp Duty Payment:

 Stamp duty on eForm FC-1 can be paid electronically through the MCA portal.
 Payment of stamp duty electronically through MCA portal is mandatory in respect of
the states which have authorized the Central Government to collect stamp duty on
their behalf.
 Now eStamp duty payment is to be done online through MCA portal for all the states.
 Mandatory Attachment(s)
 Certified copy of the charter, statutes, or memorandum and articles of the company or
other instrument constituting or defining the constitution of the company (Mandatory).
 List of directors and secretary of the foreign company (Mandatory).
 Power of attorney or board resolution in favor of the authorized representative(s)
(Mandatory).
 Reserve bank of India approval letter (It is mandatory to attach attested copy of such
approval).
 Details of other places of business in India (if any)
 It is mandatory to enter the date of closure of such place of business and also FCRN of
such office
 Particulars of place(s) of business in India established on any earlier occasion(s) other
than above (if any)
 Maximum seven of such offices can be entered. If more than seven then details can be
given in necessary attachment(s).
(2) Every foreign company existing at the commencement of this Act shall, if it has not delivered
to the Registrar before such commencement, the documents and particulars specified in sub-
section (1) of section 592 of the Companies Act, 1956 (1 of 1956), continue to be subject to the
obligation to deliver those documents and particulars in accordance with that Act.

(3) Where any alteration is made or occurs in the documents delivered to the Registrar under this
section, the foreign company shall, within thirty days of such alteration, deliver to the Registrar
for registration, a return containing the particulars of the alteration in the prescribed form.3

eForm FC-2 , Section 380(3) of the Companies Act, 2013 and Rule 3(4) of the Companies
(Registration of Foreign Companies) Rules, 2014

Filing requirements:

Every foreign company on alterations in the charter or statute or any other instrument governing
the company, alterations in the particulars of Director/Secretaries of the foreign company , any
change in the registered or principal office of the company in the country of incorporation, any
change in the particulars of authorized representative(s) of the company and any change in other
places of business in India of the company, has to file eform FC-2 within 30 days of the
alterations made.

This eForm is required to be filed with Registrar of Companies and a copy is routed to concerned
RoC of the respective state by the system. An alert is generated at the concerned RoC to inform
of the filing done at RoC, Delhi.

Mandatory Attachment(s)

Copy of approval letter (it is mandatory if any approval is required for such alteration).4

Section 381 provides with Accounts of foreign company.—

(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

3
https://cleartax.in/s/foreign-subsidiary-company-compliances
4
Companies (Registration of Foreign Company) Rules, 2014
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. 204

(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.

eForm FC-3, Section 381 of the Companies Act, 2013 and Rule 4, 5 and 6 of Companies
(Registration of Foreign Companies) Rules, 2014

Filing requirements:
Every foreign company is required to prepare and file financial statements within a period of six
months of the close of the financial year of the foreign company to which the financial
statements relate to Delhi RoC in eForm number FC-3. It shall also prepare and file a list of
places of business in India established by a foreign company as on date of the balance sheet in
the same form.

However, the Registrar can extend the said period to not more than three months on application
made in writing.

Mandatory Attachment(s)

 Copy of latest consolidated financial statement of parent company (Mandatory).

 Copy of balance sheet and profit and loss account duly authenticated under section
381(1) (Mandatory)
 In case the document is in any other language other than English, certified translation
in English language is mandatory5

Section 382 of act provides for the Display of name and exhibit on the outside of every office or
place they carry their business in country and the name of the company and of the country in
which the company is incorporated, to be stated in legible English characters in all business
letters, billheads and letter paper, and in all notices, and other official publications of the
company.

5
https://cleartax.in/s/foreign-subsidiary-company-compliances
Section 383 of the act provides for the Any process, notice, or other document required to be
served on a foreign company shall be deemed to be sufficiently served, if addressed to any
person whose name and address have been delivered to the Registrar under section 380.

Section 384 provides for compliance of report of Debentures, annual return, registration of
charges, books of account and their inspection.

E-Form FC-4, Section 384(2) of the Companies Act 2013 and Rule 7 of Companies
(Registration of Foreign Companies) Rules, 2014.
Filing Requirements : Every foreign company shall prepare and file annual return of the
company in eForm FC-4 within 60 days from the close of financial year.
Mandatory Attachment(s) :
 Details of Promoters, Directors and Key managerial personnel and changes therein since
close of previous financial year. (Mandatory).
 Details of directors and key managerial personnel and their remuneration. (Mandatory).
 Details of the meeting of the members or class thereof, board and its various committees
along with attendance details. (Mandatory).
 Particulars of members and debenture holders along with changes therein since the close
of previous financial year. (Mandatory).
 Particulars of Holding, subsidiary and associate companies and firms. (Mandatory in case
number of entities prescribed at serial no 6 is more than seven).6

Section 385 provides about the fees to be paid to Registrar for the Registration of Documents.

Prospectus
As per Section 387 of the Companies Act 2013, no person shall issue, circulate or distribute in
India any prospectus offering to subscribe for Securities of Foreign Company, unless the
prospectus is dated and singed, and contains particulars with respect to the following matters,
namely:

i. the instrument constituting or defining constitution of the company;

ii. the enactments or provisions by or under which the incorporation of the company was
effected;
iii. address in India where the said instrument, enactments or provisions or copies
thereof , and if the same are not 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

6
https://cleartax.in/s/foreign-subsidiary-company-compliances
 v. whether the company has established place of business in India, and, if so, the address
of its principal office in India; and

States the matters specified under Section 26 of the Companies Act 2013.

Penalties and Punishment for Contravention

As per Section 392 of the Companies Act 2013,without prejudice to the provisions of Section
391 ,if Foreign Company contravenes the provisions of Chapter XXII , then 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 case of 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 both .Therefore
one can say that amount of penalties and quantum of punishment has increased under Companies
Act 2013

Standard Chartered Bank

Standard Chartered plc is a British multinational bank with operations in consumer, corporate
and institutional banking, and treasury services. Despite being headquartered in the United
Kingdom, it does not conduct retail banking in the UK, and around 90% of its profits come
from Asia, Africa, and the Middle East.

History
Standard Chartered bank was formed in 1969 through the merger of two separate banks – the
Standard bank of British South Africa and the Chartered bank of India, Australia and
China. These banks had capitalised on the expansion of trade between Europe, Asia and Africa.
Its history dates back more than 150 years.

Chartered bank was founded by James Wilson following the grant of a royal charter by Queen
Victoria in 1853. After opening branches in Mumbai, Kolkata, Shanghai, Hong Kong and
Singapore over the next decade, it traded in cotton from Mumbai, indigo and tea from Kolkata,
rice from Burma, sugar from Java, tobacco from Sumatra, hemp from Manila and silk from
Yokohama.

Standard bank was founded in the Cape Province of South Africa in 1862 by John Paterson,
and started business in Port Elizabeth in the following year. It helped finance the development of
the Kimberley diamond fields from 1867 and extended its network further north to the new town
of Johannesburg when gold was discovered there in 1885. The bank had 600 offices across
southern, central and eastern Africa by 1953.

Standard Chartered Bank has been operating in India for over 160 years making it one of the
oldest foreign Bank. The Bank has a network of 100 branches across 42 cities. Key business
segments include Corporate, Commercial and Institutional Banking as well as Consumer, Private
and Business Banking. In addition to a full-service universal bank, the group has a Non-Banking
Finance lending entity to complement the Bank’s presence in specific geographies and segments,
a Retail securities broking business and is the first foreign Bank to have commenced banking
activities in India’s International Financial Services Centre (in GIFT City, Gujarat).Globally, we
are a leading international banking group, with a presence in 59 of the world’s most dynamic
markets and serving clients in a further 85. Our purpose is to drive commerce and prosperity
through our unique diversity, and our heritage and values are expressed in our brand promise,
here for good. Standard Chartered PLC is listed on the London and Hong Kong Stock
Exchanges.7

Who They Are

D r i v i n g c o m m e r c e a n d p r o s p e r i t y : The people and businesses we serve are
the engines of trade and innovation, and central to the transition to a fair,
sustainable future. With 83,000 employees and a presence in 59 markets, our
network serves customers in over 120 markets worldwide. We're listed on the
London and Hong Kong Stock Exchanges.

U s i n g o u r u n i q u e d i v e r s i t y : Across more than 50 countries we’ve built a bank

with the diverse experience and capabilities that set us apart.Our footprint connects

7
About Us – Standard Chartered India (sc.com)
 emerging and high-growth markets with more established economies, allowing us to
channel capital to where it’s needed the most.

S u p p o r t i n g s u s t a i n a b l e g r o w t h : We’re in a unique position to support the

massive shift of capital towards sustainable finance, which has become a priority
for investors, companies and individuals alike. We’re determined to develop
significant sustainable finance revenues to grow our business, and to integrate
environmental and social considerations into all our decision-making.

Is Standard Charted Bank is Foreign Company?

Standard Chartered PLC, they UK based parent, became the first foreign company to list in India
through the issuance of Indian Depository Receipts in June 2010.
They also have a number of subsidiaries operating in India:

 Standard Chartered Securities (India) Ltd, the vehicle for the equities business
 Standard Chartered Private Equity Advisory (India) Private Limited
 Standard Chartered Investments and Loans (India) Limited
 Standard Chartered Finance limited
 Standard Chartered Global Business Services Pvt. Ltd.

References
1. Ravi Puliani and Mahesh Puliani, Bharat’s Companies Act, 2013, (Bharat Law House Pvt.
Ltd., New Delhi, 2014

2. Company Law: Piercing the Corporate Veil, D.S. Chopra and Nishant Arora, Eastern Law
House, New Delhi, 2013

3. Indian Company Law, Avtar Singh, Eastern Book Company, Lucknow, 2009

4 Ghial, Dr. Rita, Company Law, Shree Ram Publisher, Chandgarh, 2021

5. www.caclubindia.com

6. About Us – Standard Chartered India (sc.com)

7. https://cleartax.in/s/foreign-subsidiary-company-compliances
8. https://blog.ipleaders.in/foreign-company-compliance-overview