Foreign & Government Companies
Section 379. Application of Act to foreign companies.
379(1).
Sections 380 to 386, and Sections 392 and 393 of the Companies Act apply to all foreign companies operating in India.
These sections deal with matters such as:
Registration of foreign companies in India,
Documents to be filed,
Service of process,
Accounts,
Display of name, etc.
379(2).
A foreign company must follow additional provisions if:
50% or more of its paid-up share capital (equity, preference, or a combination) is held by:
One or more Indian citizens, or
One or more companies or bodies corporate incorporated in India, or
A combination of both.
If this 50% threshold is met, then:
The foreign company must comply with this entire Chapter (Chapter XXII – Foreign Companies).
It must also follow any other provisions of the Companies Act that may be prescribed.
It must comply as if it were a company incorporated in India, but only with respect to the business it conducts in India.
Section 380. Documents, etc., to be delivered to Registrar by foreign companies.
380(1).
A foreign company must deliver the following documents to the Registrar within 30 days after establishing its place of business in India:
(a) A certified copy of its charter, statutes, memorandum and articles, or any other document that defines its constitution.
If this document is not in English, a certified English translation must also be filed.
(b) The full address of its registered office or principal office abroad.
(c) A list of directors and the secretary of the company, with all prescribed details.
(d) The name and address (or names and addresses) of one or more persons resident in India who are authorised to receive:
Legal notices.
Court documents, and
Any official communication on behalf of the company.
(e) The full address of the Indian office that will act as the company’s principal place of business in India.
(f) Details about the opening or closing of any place of business in India on previous occasions (if any).
(g) A declaration stating that none of the company's directors or the authorised Indian representative:
Has been convicted, or
Debarred from creating or managing companies in India or abroad.
(h) Any other information that may be prescribed by rules.
380(2).
When the Companies Act, 2013 came into force, some foreign companies were already operating in India.
If such a foreign company had not yet submitted the required documents under Section 592 of the Companies Act, 1956, it must still submit them.
These older foreign companies must deliver those documents and details according to the requirements of the 1956 Act, not the 2013 Act
380(3).
If any change or alteration happens in the documents that the foreign company has already filed with the Registrar, the company must update the Registrar.
The foreign company must file a return giving details of the alteration.
This return must be filed in the prescribed form.
The filing must be done within 30 days from the date the alteration occurs.
Section 381. Accounts of foreign company. 382. Display of name, etc., of foreign company.
381(1).
Every foreign company must do the following each calendar year:
(a) Prepare a balance sheet and a profit and loss account.
These must be in the prescribed form.
They must include all required particulars.
Any documents that must be attached or annexed (as prescribed) must also be included.
(b) Deliver copies of these financial statements to the Registrar of Companies (ROC).
The Central Government may issue a notification to relax these requirements.
It may declare that for any foreign company or a class of foreign companies:
Clause (a) (preparing balance sheet and P&L in prescribed form) does not apply, or
It applies with exceptions or modifications.
381(2).
If any of the financial documents required under 381(1) such as the balance sheet, profit and loss account, or attached documents are not in English, the company must provide an English translation.
The translation must be a certified translation, meaning it must be officially verified as accurate.
381(3).
Along with its annual financial documents (balance sheet, profit and loss account, etc.), every foreign company must submit an additional document to the Registrar.
This document is a list of all places of business the foreign company has established in India.
The list must be in the prescribed form.
The list must reflect the company’s places of business as on the date the balance sheet is prepared.
Section 382. Display of name, etc., of foreign company.
Every foreign company shall:
(a).
Every foreign company must clearly display certain information at every office or place where it conducts business in India.
The information that must be displayed includes:
The name of the company, and
The country in which it is incorporated.
This information must be written in:
English, using easily readable letters.
The local language (or one of the languages commonly used in that area).
The display must be placed conspicuously on the outside of the office or business location so the public can easily see it.
(b).
The foreign company must print its name and the name of the country where it is incorporated on all its official documents.
These details must appear in clear, readable English characters.
The requirement applies to:
All business letters,
Billheads,
Letter paper,
All notices, and
Any other official publications of the company.
(c).
If the liability of the members of a foreign company is limited, the company must give clear notice of this fact in two ways:
(i). Notice on all official documents
The company must state that its members’ liability is limited in legible English characters on:
Every prospectus it issues.
All business letters.
Bill-heads.
Letter paper.
Notices.
Advertisements.
Any other official publications.
(ii). Notice displayed at business premises
The company must also conspicuously display this fact:
On the outside of every office or place of business it has in India,
In legible English characters, and
In legible characters of the local language (or a commonly used local language).
Section 383. Service on foreign company.
A foreign company must provide the name and address of its authorised person(s) in India under Section 380.
Any process, notice, or document that must be served on the foreign company is considered properly delivered if it is:
Addressed to that authorised person.
Left at the address provided.
Sent by post to that address.
Sent using an electronic mode (such as email).
Once sent in any of these ways, the service of the notice or document is treated as legally sufficient.
Section 384. Debentures, annual return, registration of charges, books of account and their inspection.
384(1).
Section 71 of the Companies Act deals with debentures, including:
Issue of debentures.
Secured debentures.
Debenture trustees.
Redemption.
Creation of a debenture redemption reserve.
Saying that Section 71 applies mutatis mutandis to a foreign company means:
All rules of Section 71 apply to a foreign company as well.
But with necessary changes or adjustments to fit a foreign company’s situation.
384(2).
Section 92 (Annual Return) and Section 135 (Corporate Social Responsibility) of the Companies Act can also apply to foreign companies.
However, these sections will apply with such exceptions, modifications, or adaptations as may be specified in the rules made under the Act.
In effect, a foreign company must comply with the requirements of Section 92 and Section 135 in a modified form, depending on what the rules prescribe.
384(3).
Section 128 of the Companies Act deals with books of account that companies must maintain.
This section applies to a foreign company, but only to the extent of its business activities in India.
A foreign company must keep, at its principal place of business in India, proper books of account showing:
Money received and spent in India.
Sales and purchases made in India.
Assets and liabilities relating to its Indian business.
The foreign company is not required to keep books for its global operations in India only the part relating to its business carried on in India.
384(4).
Chapter VI of the Companies Act deals with registration of charges.
This chapter will also apply to foreign companies, but mutatis mutandis meaning with necessary adjustments to fit their situation.
Any charge that a foreign company creates or acquires on its property in India must follow the same rules that Indian companies follow for registering charges.
384(5).
Chapter XIV of the Companies Act deals with inspection, inquiry, and investigation of companies.
These provisions also apply to the Indian business operations of a foreign company.
They apply mutatis mutandis, so the same rules apply, but with necessary adjustments to fit a foreign company’s situation.
Section 385. Fee for registration of documents.
Any document that a foreign company is required to file under this Chapter must be registered by the Registrar.
For registering such documents, a prescribed fee must be paid.
The amount of this fee will be set by the rules made under the Act.
Section 386. Interpretation.
(a). Certified
This means the document has been certified, in the prescribed manner, as either:
A true copy, or
A correct translation (where applicable).
(b). Director of a foreign company
This includes not only formally appointed directors but also any person whose directions or instructions the Board habitually follows.
In other words, even someone who controls the Board from behind the scenes is treated as a director.
(c). Place of business
This includes any share transfer office or share registration office, not just main business locations.
Section 387. Dating of prospectus and particulars to be contained therein.
387(1).
No one can issue, circulate, or distribute in India any prospectus inviting people to subscribe for securities of a company incorporated outside India.
This applies whether or not the foreign company:
Already has a place of business in India, or
Will establish one in the future.
A prospectus may be issued only if it is dated, signed, and contains the required particulars.
(a) Mandatory particulars that must be included
The prospectus must contain clear details about the following:
(i). The instrument (such as charter, statutes, memorandum, or articles) that constitutes or defines the constitution of the company.
(ii). The law, enactments, or provisions under which the company was incorporated.
(iii). The address in India where these instruments or their copies can be inspected.
If they are not in English, the location must also provide a certified English translation.
(iv). The date and the country in which the company was incorporated or will be incorporated.
(v). Whether the company has already set up a place of business in India.
If yes, the prospectus must state the address of its principal office in India.
(b) Additional requirement
The prospectus must also include all the matters required under Section 26 of the Companies Act.
Section 26 lists detailed disclosures that must be included in every prospectus, such as:
Company details,
Financial information,
Risk factors,
Capital structure,
Management details, etc.
Sub-clauses (i), (ii), and (iii) of clause (a) do not apply if the prospectus is issued more than two years after the company becomes entitled to commence business.
387(2).
A prospectus cannot contain any condition that makes an investor waive the protections or disclosures required under sub-section (1).
The company cannot force an investor to give up their legal rights or protections.
If a prospectus contains a clause saying an investor is automatically assumed to know about contracts, documents, or matters not clearly mentioned in the prospectus, that clause is void.
An investor cannot be forced or presumed to know about hidden, undisclosed, or unreferenced information.
This rule ensures that companies must give full, clear, and proper disclosures in the prospectus itself.
It prevents companies from avoiding responsibility through unfair or misleading clauses.
Such hidden-assumption clauses are considered against public policy and not enforceable under contract law.
387(3).
An application form for subscribing to the securities of a foreign company cannot be issued in India by itself.
It must always be issued together with a proper prospectus.
The prospectus must:
Fully comply with all requirements of this Chapter, and
Not violate Section 388, which deals with false or misleading statements in a prospectus.
This rule does not apply if the application form is issued as part of a genuine (bona fide) invitation to a person to enter into an underwriting agreement.
Underwriting agreements are contracts where the underwriter agrees to buy or guarantee the sale of securities and they are not public investment invitations.
387(4).
This section does not apply in the following two situations:
(a) Issue to existing members or debenture holders
If a prospectus or application form is issued only to existing members or existing debenture holders of the foreign company, this section does not apply.
It also does not matter whether the applicant has the right to renounce (i.e., transfer the offer to someone else).
(b) Prospectus for securities identical to already listed ones
Except for the requirement that a prospectus must be dated, this section does not apply to a prospectus relating to securities that:
Are identical (uniform in all respects) to existing securities already issued &
Are currently traded or quoted on a recognised stock exchange.
This usually applies to follow-on offers of already listed securities.
Apart from the above exceptions, the section applies to all prospectuses or application forms, whether they are:
Issued at the time of forming the company, or
Issued later during its existence.
387(5).
Even if a person follows all the requirements of this section, they are not protected from liability under other laws.
They can still face legal consequences under any other Indian law or other sections of the Companies Act.
This section does not act as a shield against broader legal responsibilities.
Section 388. Provisions as to expert’s consent and allotment.
388(1).
No one in India is allowed to issue, circulate, or distribute a prospectus offering securities of a foreign company
(a) Expert’s consent requirement
A prospectus cannot be issued if:
It contains a statement that appears to be made by an expert &
The expert has not given written consent to include that statement in that exact form and context or
The expert had given consent earlier but withdrew it before the prospectus was delivered for registration or
The prospectus does not contain a clear statement saying the expert has given consent and has not withdrawn it.
So , you cannot use an expert’s name, opinion, or report unless the expert has formally approved and allowed its use and this fact is clearly disclosed.
(b) Prospectus must bind persons under Sections 33 and 40
A prospectus for a foreign company must make sure that any person applying for securities through it is legally bound by:
Section 33 which contains rules about proper registration of the prospectus, and
Section 40 which contains rules requiring that securities be dealt with only through recognised stock exchanges.
These sections apply to the extent relevant to foreign company prospectuses.
If the prospectus does not include these binding provisions, it is considered invalid and cannot be issued to the public.
388(2).
A statement is treated as part of the prospectus even if it is not written directly in the main text.
It will still be considered included if it appears in:
Any report attached to the prospectus.
Any memorandum printed on the prospectus.
Any document incorporated by reference into the prospectus.
Any document issued along with the prospectus.
So, anything attached to, referred to, or issued with the prospectus is legally treated as part of the prospectus.
Section 389. Registration of prospectus.
No one can issue, circulate, or distribute in India a prospectus offering securities of a foreign company (whether already incorporated or yet to be formed), unless certain conditions are met first.
Conditions that MUST be fulfilled before issuing the prospectus
A certified copy of the prospectus must be delivered to the Registrar for registration
The copy must be certified by:
The chairperson of the company, and
Two other directors.
They must certify that the prospectus has been approved by a resolution of the company’s managing body.
The prospectus must clearly state on its face that a certified copy has been delivered to the Registrar.
The certified copy filed with the Registrar must have:
All consents required under Section 388 (relating to expert statements).
Any other prescribed documents attached or endorsed on it.
Section 390. Offer of Indian Depository Receipts.
This section overrides any other laws.
The Central Government is empowered to make specific rules relating to Indian Depository Receipts (IDRs) for foreign companies.
The Central Government may frame rules for the following:
(a) Offer of Indian Depository Receipts (IDRs)
Rules on how foreign companies can issue IDRs in India.
(b) Disclosures in prospectus/offer documents
Rules about what information must be disclosed in a prospectus or letter of offer related to IDRs.
(c) How IDRs are handled in depository mode
Rules on how IDRs will be:
Held and processed in depositories,
Managed by custodians &
Handled by underwriters.
(d) Sale, transfer and transmission of IDRs
Rules governing how IDRs can be sold, transferred, or passed on (e.g., on death) to others.
These rules apply whether the foreign company:
Already has a place of business in India,
Does not have one, or
Will or will not set one up in the future.
Section 391. Application of sections 34 to 36 and Chapter XX.
391(1).
The law states that Sections 34, 35, and 36 of the Companies Act will apply in two specific situations involving foreign companies.
(1) These provisions apply to:
(i) Prospectus issued by a foreign company under Section 389
If a foreign company issues a prospectus in India under Section 389, then Sections 34 to 36 apply exactly as they do for Indian companies.
This means the foreign company is subject to:
Section 34 - Criminal liability for misstatements in prospectus
Section 35 - Civil liability for misstatements in prospectus
Section 36 - Fraudulently inducing persons to invest
(ii) Issue of Indian Depository Receipts (IDRs)
When a foreign company issues IDRs, Sections 34 to 36 also apply.
391(2).
This rule applies only when both conditions give below are true:
1. A foreign company has raised money in India by offering or issuing securities under this Chapter &
2. That money has not yet been repaid or redeemed.
If both conditions are met, then:
The provisions of Chapter XX (which deals with winding up of companies) will apply to the closure of the foreign company’s place of business in India.
These provisions apply mutatis mutandis, meaning with necessary modifications.
The foreign company will be treated as if it were an Indian company for the purpose of winding up its Indian business.
So, If a foreign company raises money from Indian investors and hasn’t yet returned or redeemed that money, it cannot simply shut down its business in India and leave.
Instead:
The winding-up rules that apply to Indian companies will also apply to that foreign company.
Section 392. Punishment for contravention.
If a foreign company violates any provision of this Chapter, penalties apply.
Penalties on the Foreign Company
The company must pay a minimum fine of ₹1,00,000.
The fine can go up to ₹3,00,000.
If the violation continues day after day, it becomes a continuing offence.
In that case, the company must pay an additional fine of up to ₹50,000 per day after the first day of the violation.
Penalties on Officers in Default
Every officer of the foreign company who is responsible for the default is also punished.
The fine for each such officer is:
Minimum: ₹25,000
Maximum: ₹5,00,000
Section 393. Company’s failure to comply with provisions of this Chapter not to affect validity of contracts.
Even if a foreign company fails to comply with the requirements of this Chapter:
Its contracts and transactions remain valid
Any contract, dealing, or transaction entered into by the company is not invalid just because the company did not comply with the law.
The company can still be sued for those contracts.
BUT the company cannot initiate legal action
The company cannot file a suit.
Cannot claim a set-off.
Cannot make a counterclaim.
And cannot start any legal proceeding related to such contract or transaction until it complies with all applicable provisions of the Act.
Section 393A: Exemptions under this Chapter
Section 393A gives the Central Government the authority to exempt certain companies from the rules of this Chapter.
The Central Government may exempt:
(a) Any class of foreign companies
This includes companies already operating in India.
(b) Any class of companies incorporated or to be incorporated outside India:
Regardless of whether they:
Have established a place of business in India, or
will or will not establish one in the future.
The exemption must be made through an official notification issued by the Central Government.
A copy of the notification must be laid before both Houses of Parliament as soon as possible.
Section 394. Annual reports on Government companies.
394(1).
The Central Government must ensure:
(a) Preparation of an Annual Report
An annual report on the working and affairs of the Government company must be prepared within 3 months of its Annual General Meeting (AGM).
This is the same AGM where:
The audit report, and
The comments of the Comptroller and Auditor-General (CAG) are placed before the shareholders (as required under Section 143(6)).
(b) Laying the Report Before Parliament
After the annual report is prepared, the Central Government must lay it before both Houses of Parliament as soon as possible.
The report must be accompanied by:
The audit report from the Auditor, and
The CAG's comments or any supplementary remarks.
394(2).
When a State Government is also a member of a Government company
If a State Government, along with the Central Government, is a shareholder in a Government company, then:
Obligation of the State Government
The State Government must place a copy of the annual report (prepared under sub-section (1)) before the State Legislature either:
The House, or
Both Houses, depending on that State’s legislative structure.
This report must be accompanied by:
The audit report, and
The CAG’s comments or supplementary remarks.
Section 395. Annual reports where one or more State Governments are members of companies.
395(1).
This rule applies when the Central Government is not a member of a Government company, and only State Government(s) hold shares in it.
If the Central Government is not a member, then every State Government that is a member, or the sole State Government member, must do the following:
(a) Prepare an annual report
The State Government must ensure an annual report on the working and affairs of the Government company is prepared.
This must be done within the same time limit specified in Section 394(1),
This is usually within 3 months of the company’s AGM where the CAG’s audit report is presented.
(b) Lay the report before the State Legislature
After preparation, the State Government must place the annual report before its State Legislature either:
The single House, or
Both Houses, depending on the State’s legislative system.
It must include:
The audit report, and
The CAG’s comments or supplementary remarks.
395(2).
The rules in this section (395) and section 394 also apply to a Government company that is in liquidation.
They apply in the same way as they apply to any other Government company that is still operating.
Even if a Government company is being wound up or liquidated, the following must still happen:
Preparation of the annual report
Presentation of the annual report and audit documents
Submission to Parliament or the State Legislature (as applicable)
