FEMA and Companies act Compliances for a Foreign Company doing business in India

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BY: CS CHEENU BHATIA

FEMA and Companies act Compliances for a Foreign Company doing business in India

As per section 2(42) of Companies act 2013 \”foreign company\” means any company or body corporate incorporated outside 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.

A Foreign company can set up its business operations in India through:

  • Branch Office (BO)
  • Liaison Office (LO)
  • Project Office (PO)
  • Setting up of the subsidiary in India

RBI approval for setting up of BO/LO/PO:

  1. The application shall be submitted by the Foreign entity in Form FNC (Annex B) to a designated AD Category – I bank, along with the documents mentioned in Annexure-A for allotment of Unique Identification Number (UIN).
  2. Applications from foreign companies for establishing Branch Office in India shall be forwarded by the AD Category-I bank to the General Manager, Reserve Bank of India.
  3. The AD Category-I bank shall after exercising due diligence in respect of the applicant’s background, and satisfying itself will grant approval to the foreign entity for establishing BO/LO/PO in India.

ROC approval for setting up of BO/LO/PO: Application to Registrar of Companies shall be made in Form FC-1 along with required docs within 30 days from the date of RBI approval.

Compliances under Companies Act:

Section 380: Documents to be Delivered to Registrar by Foreign Companies

380. (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, 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 address 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) a declaration that none of the directors of the company or the authorised representative in India has ever been convicted or debarred from the formation of companies and management in India or abroad; and

(h) any other information as may be prescribed.

As per Rule 3(3) the foreign company shall, within a period of thirty days of the establishment of its place of business in India, file an application with the registrar in Form FC-1.

As per Rule 3(4) where any alteration is made or occurs in the document delivered to the Registrar for registration, the foreign company shall file Form FC-2 within a period of thirty days from the date on which the alteration was made or occurred.

Section 381: Accounts of Foreign Company             

(1) Every foreign company shall, in every calendar year(a) make out a balance sheet and profit and loss account (b) deliver a copy of those documents to the Registrar:

(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 a copy 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.

Section 382: Display of Name of Foreign Companies:

Every Foreign Company is required to exhibit outside its every office or place of business in India, and in all business letters, bill heads and letter paper, and in all notices, and other official publications, the name of the company and the country where it is incorporated. The name shall be in legible letters of English language and also in the local language of the state where such office is situated.

Besides the name and the country of Incorporation, the company is also required to mention the fact that the liability of the company is limited if it is so.

Section 383: Service on Foreign Company:

Any process, notice, or other document required to be served on a foreign company shall be addressed to the person whose name and address have been delivered to the Registrar and sent by post or by electronic mode.

Section 384: Debentures, Annual Return, Registration of Charges, Books of Accounts and their Inspection:

Debentures:

The provisions of Section 71 shall apply mutatis mutandis to a foreign company.

Annual Return:

Every foreign company shall prepare and file, within a period of sixty days from the last day of its financial year, to the Registrar annual return in Form FC.4 containing the particulars as they stood on the close of the financial year.

Books of Accounts:

The provisions of Section 128 shall apply to a foreign company to the extent of requiring it to keep at its principal place of business in India.

Registration of Charges:

The provisions of Chapter VI shall apply mutatis mutandis to charges on properties which are created or acquired by any foreign company.

Inspection:

The provisions of Chapter XIV shall apply mutatis mutandis to the Indian business of a foreign company as they apply to a company incorporated in India.

Compliances under Foreign Exchange Management Act (FEMA) 1999

  • BO/LOrequired to submit Annual Activity Certificates (AAC) (Annex 4) from Chartered Accountants, at the end of March 31, along with the audited Balance Sheet on or before September 30 of the respective year.
  • Annual return on Foreign Liabilities and Assets (FLA return) is required to be submitted by all the India resident companies which have received FDI and/ or made overseas investment in any of the previous year(s), including current year by July 15 every year.

There are some other compliances like Goods and service tax (GST), Income tax which is also applicable.