Foreign Companies

JV with an Indian Partner (IP)

 Wholly Owned Subsidiary Co.
Set up WOS
Sectors where 100% FDI is permitted
under FDI policy
Incorporation of the Co.
Registration & incorporation - Set of
applications have to be filed with ROC.
Subject to Indian laws & regulations as
appropriate to other domestic Indian Co’s.
 S. 6 (6) of FEMA, 1999
 FEMA (Establishment in India of branch / office / other
place of business) Regulations, 2000
 Master Circular on Establishment of Liaison / Branch /
Project Offices in India by Foreign Entities – RBI /
2014 – 2015 / 11, Master Circular No.7/2014-15
 Prohibition –
 No person, being a citizen of Pakistan, Bangladesh, Sri
Lanka, Afghanistan, Iran or China
 Without prior permission of RBI - shall establish in
India, a branch /a liaison office / a project office / any
other place of business (Reg. 4)
 Liaison Office/ Representative Office
 Operates as a channel of communication between –
Principal place of business / HO & entities in India.
 Cannot assume any commercial activity directly /
indirectly &
 Cannot earn any income in India
 Restricted to collect information –
About possible market opportunities &
Provide information about Co. & its products - to
the potential Indian customers.
 Test & understand the Indian market - Carry out R&D activities
/ To understand the problem of existing clients of the Co & serve
them better.
 Permission to set up such offices is initially granted for a period
of 3 years - May be extended from time to time 
 Permitted activities for a LO in India of a
Person Resident Outside India
(i) Representing in India - PC / group Co’s
(ii) Promoting export - import from / to
India.
(iii) Promoting technical / financial
collaborations between PC / group Co’s
& Co’s in India.
(iv) Acting as a communication channel
between PC & Indian Co’s.
 Obtaining approval from
 Approval for establishing a LO in India is
granted by RBI.
 LO of Foreign Insurance Co’s
Insurance Regulatory & Development
Authority (IRDA).
 Banks
Department of Banking Operations &
Development (DBOD), RBI.
See - Banking Regulation Act, 1949
 Project Office
 PO - means a place of business to represent the interests
of FC executing a project in India but excludes a LO;
 Site Office - Means a sub-office of PO
 FC - Planning to execute specific projects in India can
set up temporary project / site offices
 PO’s cannot undertake / carry on any activity other
than the activity relating & incidental to execution of
the project.
 PO’s may remit outside India the surplus of the project
on its completion - General permission - granted by
RBI. 
 RBI - grants general permission to foreign entities to
establish PO’s subject to specified conditions.
 Project Office
PO - have secured a contract from an Indian Co. to
execute a project in India &

 However, if the above criteria are not met, the foreign

entity has to approach the RBI, CO, for approval.
 Branch Office ?
Permitted activities for a branch in India of a
Person Resident Outside India
i) Export/Import of goods
ii) Rendering professional / consultancy services
iii) Carrying out research work, in which - PC is engaged.
iv) Promoting technical / financial collaborations between Indian
Co’s & PC / overseas Group Co.
v) Representing PC in India & acting as buying / selling agent in
India.
vi) Rendering services in IT & development of software in India.

vii) Rendering technical support to the products supplied by PC /

group Co’s.
viii) Foreign airline / shipping Co.
 Branch Office
 Retail trading activities of any nature is not allowed for
a Branch Office in India
 A branch office is not allowed to carry out
manufacturing, processing activities in India, directly or
indirectly
 RBI - General permission to foreign Co’s for
establishing branch / unit in SEZs to undertake
manufacturing & service activities. “Stand Alone Basis”
 Permission for setting up BO is granted by RBI
 BO established with the approval of RBI - May remit
outside India
 Profit of the branch
 Net of applicable Indian taxes &
 Foreign Co – Sec. 2 (42)
 Means any Co. / body corporate incorporated
outside India which, -
(a) has a place of business in India whether
 by itself / through an agent,
Physically / through electronic mode; &
(b) Conducts any business activity in India in
any other manner.
Investigation, etc., of Foreign Co’s – Sec. 228
 Provisions of Chapter XIV shall apply mutatis mutandis
to inspection, inquiry or investigation in relation to
FC’s.
 Application of Act to FC’s - Chapter XXII
Co’s Incorporated Outside India - Ss 379
 Where not less than 51% of the paid-up SC
 Whether equity / preference / partly equity & partly
preference - of a F.C. is held
By one / more citizens of India or by one / more Co’s
/ bodies corporate incorporated in India, or
By one / more citizens of India & one / more Co’s /
bodies corporate incorporated in India,
 Whether singly / in the aggregate
 Such Co. shall comply with the P/o/T/Ch. &
 Such other P/o/T/A…with regard to the business
carried on by it in India as if it were a Co.
incorporated in India.
Documents, etc., to be delivered to ROC by FC’s - Sec. 380
 Accounts of FC (S. 381)
 (1) Every FC shall, in every calendar year, -
(a) Make out a balance sheet & profit & loss
account… containing such particulars & including /
having annexed / attached thereto such documents as
may be prescribed; &
(b) Deliver a copy of those documents to - ROC:
 P… CG may, by notification, direct that, in the case of any FC /
class of FC’s - the requirements of cl. (a) shall not apply, / shall
apply subject to such exceptions & modifications…
 (2) Document…mentioned… in the English language.
 (3) Every FC shall send to - ROC along with the
documents… a copy of a list… of all places of business
established by Co. in India as at the date with reference
to which the balance sheet… is made out.
Display of name, etc., of FC Sec. 382
 Service on FC – Sec. 383
Any process, notice / other document
required to be served on a FC shall be
deemed to be sufficiently served
If addressed to any person whose name &
address have been delivered to - ROC U/S
380 &
Left at / sent by post – to the address
which has been so delivered to ROC /
By electronic mode.
 Debentures, Annual Return, Registration of Charges, Books of
Account & their inspection – Sec. 384

(1) P/o/S 71 shall apply mutatis mutandis to a FC. (Debentures)

(2) P/o/S 92 shall, subject to such exceptions, modifications

& adaptations as may be made therein by rules made
U/T/A, apply to a FC as they apply to a Co.
incorporated in India. (Annual Return)

(3) P/o/S 128 shall apply to a FC to the extent of requiring

it to keep at its principal place of business in India, the
books of account referred to in T/S - with respect to
monies received & spent, sales & purchases made, &
assets & liabilities, in the course of / in relation to its
business in India. (Accounts of Co’s)
 Registration of Charges,
Books of Account & their inspection – Sec. 384
(4) P/o/Ch. VI shall apply mutatis mutandis to charges on
properties which are created / acquired by any FC.
(Registration of Charges)

(5) P/o/Ch. XIV shall apply mutatis mutandis to the Indian

business of a FC as they apply to a Co. incorporated in
India. (Inspection, Inquiry & Investigation).
 Corporate Social Responsibility (CSR):
 Applicable to FC having branch office / project in India
if it fulfils criteria of ‘Net Profit’ / ‘Turnover’.
 Criteria of Net Profit etc. apply only to business
operations in India in case of FC / Project Office.
 Fee for registration of documents Sec. 385 &
 Shall be paid to ROC - For registering any document
required by T/P/O/T/Ch. to be registered… such fee, as
may be prescribed.
Interpretation – Sec. 386
 For the purposes of the foregoing P/o/T/Ch. -
 (a) Certified - Means certified in the prescribed
manner to be a true copy / a correct translation;
 (b) Director - In relation to a FC, includes any person
in accordance with whose directions / instructions the
BOD of the Co. is accustomed to act; &
 (c) Place of business - Includes a share transfer /
registration office
Dating of prospectus & particulars to be contained
therein - Sec. 387
 (1) No person shall -
Issue, Circulate / Distribute in India any
prospectus offering
To subscribe for securities of a Co.
incorporated /
To be incorporated outside India
 Whether Co. has / has not established / when
formed will / will not establish, a place of
business in India, unless the prospectus is dated
& signed, & -
 Prospectus
(a) Contains particulars with respect to following matters -
namely:-
(i) Instrument constituting / defining the constitution of
Co.
(ii) Enactments / Provisions by / under which the incorporation of
Co. was effected;
(iii) Address in India where the said instrument, enactments /
provisions, / copies thereof, & if the same are not in the English
language, a certified translation thereof in English language can
be inspected;
(iv) Date on which & the country in which Co. would be / was
incorporated; &
(v) Whether Co. has established a place of business in India &, if so,
the address of its principal office in India; &
 Prospectus
(b) States the matters specified U/S 26:
P… S/Cl. (i), (ii) & (iii) of Cl.(a) of T/Ss shall not apply in
the case of a Prospectus issued more than 2 years after
the date at which the Co. is entitled to commence
business.
(S. 26- Prospectus issued by / on behalf of a PLC)
(2) Any condition requiring / binding an applicant
for securities to waive compliance with any
requirement imposed by virtue of Ss (1) /
Purporting to impute him with notice of any
contract, documents / matter not specifically
referred to in the prospectus, shall be void.
 Prospectus
(3) No person shall issue to any person in India a
form of application for securities of such a Co. /
intended Co. as is mentioned in Ss (1),
 Unless the form is issued with a prospectus
which complies with T/P/o/T/C & such issue
does not contravene the provisions of Sec. 388:

 P… this Ss shall not apply if it is shown that the

form of application was issued in connection
with a bona fide invitation to a person to enter
into an underwriting agreement with respect to
securities.
 (4) This section – (Right Issue)
 (a) Shall not apply to the issue to existing members / debenture
holders of a Co. of a prospectus / form of application relating to
securities of the Co., whether an applicant for securities will /
will not have the right to renounce in favour of other persons; &
 (b) Except in so far as it requires a prospectus
 To be dated,
 To the issue of a prospectus relating to securities which are /
are to be in all respects uniform with securities previously
issued &
 For the time being dealt in / quoted on a RSE, but, subject as
aforesaid,
 T/S shall apply to a prospectus / form of application whether
issued on / with reference to the formation of a Co. or
subsequently.
• (5) Nothing in T/S shall limit / diminish any
liability which any person may incur under any
law for the time being in force in India / U/T/A
apart from T/S.
 Provisions as to expert’s - Consent & allotment - Sec. 388
 (1) No person shall issue, circulate / distribute in India
any prospectus offering for subscription in securities of
a Co. incorporated / to be incorporated outside India,
whether Co. has / has not been established, / when
formed will / will not establish, a place of business in
India -
 (a) If, where the prospectus includes a statement
purporting to be made by an expert,
 He has not given, /
 Has before delivery of the prospectus for registration
withdrawn, his written consent
 To the issue of the prospectus with the statement
included in the form & context in which it is included /
 There does not appear in the prospectus a statement that
he has given & has not withdrawn his consent as
aforesaid; or
 (b) If the prospectus does not have the effect,
where an application is made in pursuance
thereof, of rendering all persons concerned
bound by all the provisions of SS 33 & 40, so far
as applicable.
 (2) For T/P/o/T/S, a statement shall be deemed
to be included in a prospectus,
 If it is contained in any report / memorandum
 Appearing on the face thereof or by reference
incorporated therein or issued therewith.
 Registration of Prospectus Sec. 389
 No person shall issue, circulate / distribute in India any
prospectus offering for subscription in securities
 of a Co. incorporated / to be incorporated outside India,
 whether the Co. has / has not established, / when formed will /
will not establish,
 A place of business in India, unless before the issue, circulation /
distribution of the prospectus in India,
 A copy thereof certified by - Chairperson of the Co. & 2 other
directors of the Co. as having been approved by resolution of the
managing body has been delivered for registration to - ROC &
 Prospectus states on the face of it that a copy has been so
delivered, & there is endorsed on / attached to the copy, any
consent to the issue of the prospectus required by Sec. 388 &
such documents as may be prescribed.
Application of sections 34 to 36 & Ch. XX (S. 391)
 (1) P/o/SS 34 to 36 (both inclusive) shall apply to the
issue of
 (i) Prospectus by a co. incorporated outside India U/S
389 as they apply to prospectus issued by an Indian
Co.;
 (ii) IDR by a FC.
 (2) P/o/Ch. XX shall apply mutatis mutandis for closure
of the place of business of a FC in India as if it were a
co. incorporated in India.
 Sec. 34 - Criminal liability for misstatements in
prospectus.
 Sec. 35 – Civil liability for misstatements in prospectus.
 Ch. XX - Winding Up
 Punishment for contravention - Sec. 392
 Without prejudice to T/P/o/S 391, if a FC contravenes
the P/o/T/C
 FC shall be punishable with fine which shall not be less
than Rs. 1 lakh - Rs. 3 lakh &
 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 &
 Every officer of FC who is in default shall be
punishable with
Imprisonment for a term which may extend to 6
months /
with fine which shall not be less than Rs. 25,000 - 5
lakh, / with both.
 Co’s failure to comply with P/o/T/Ch. not to affect
validity of contracts, etc. Sec. 393
 Any failure by a Co. to comply with T/P/o/T/Ch.
shall not affect the validity of any contract,
dealing / transaction entered into by Co. / its
liability to be sued in respect thereof
 But the Co. shall not be entitled to bring any
suit, claim any set-off, make any counter-claim /
institute any legal proceeding in respect of any
such contract, dealing / transaction, until Co.
has complied with T/P/O/T/A applicable to it.
 Chapter XV Compromises, Arrangements & Amalgamations - Merger or
amalgamation of co. with foreign co. Sec. 234

 (1) P/O/T/C unless otherwise provided under

any other law for the time being in force, shall
apply mutatis mutandis to schemes of mergers &
amalgamations between
 Co’s registered U/T/A &
 Co’s incorporated in the jurisdictions of such
countries as may be notified from time to time by
CG:

 P… CG may make rules, in consultation with

RBI, in connection with mergers &
amalgamations P/U/T/S.
 Chapter XV Compromises, Arrangements & Amalgamations - Merger or
amalgamation of co. with foreign co. Sec. 234

(2) Subject to T/P/O/ any other law for the time being in force,
A FC - may with the prior approval of RBI - merge into a Co.
registered U/T/A / vice versa &
Terms & conditions of the scheme of merger may provide, among
other things, for the payment of consideration to SH’s of the
merging Co.
In cash /
In Depository Receipts, /
Partly in cash & partly in Depository Receipts…
as per the scheme to be drawn up for the purpose.

Explanation. - For the purposes of Ss (2), the expression

“Foreign Co.” means any Co. / body corporate
incorporated outside India whether having a place of
business in India / not.