This article is written by Rahul Kulkarni, pursuing a Certificate Course In Companies Act from Lawsikho.com. Here he discusses “Are Foreign Companies required to register with the Registrar of Companies?”.

Definition of a Foreign Company

As per the definition provided under section 2(42) of the Companies Act 2013, a ‘foreign company’ means any company or body corporate incorporated outside India which, –

1. Has a place of business in India

• Whether by itself
• Or through an agent,
• Physically
• Or through electronic mode

And,

2. Conducts any business activity in India in any other manner

Need for Foreign Companies in India

The need is clearly observable and demonstrated by way of the Foreign Direct Investment (FDI) which India, as a host country, has been so welcoming of, over the past many years.

This has helped the country in getting access to new technologies, has generated numerous employment opportunities to the Indian public and has also helped foster a competitive culture, which helps the domestic companies.

The Indian Government has done its best to simply the various procedures, has introduced the SPICe form for incorporation etc. among many others

India, in 2019, has ranked 63rd among 190 nations in the Ease of Doing Business Index as per the World Bank. This is a good sign of improvement as it has moved 14 places from its previous ranking in 2018.

Ways of Establishing a Foreign Company in India and whether Registration required:

1. Joint Venture of Foreign Enterprises with Indian Companies

It has to obtain the approvals from the appropriate authorities, such as RBI and the registration process will vary based on the business structure it so chooses.

2. Limited Liability Partner (LLP) 

This is a new kind of business structure integrating the benefits of incorporation along with the benefits of a partnership. An LLP has to be mandatorily registered with the ROC

Chapter III of the LLP Act 2008 provides for the Incorporation of LLP and matters incidental thereto

S.12 provides for the Incorporation by Registration where the Registrar shall retain the Incorporation documents, containing the particulars as per s.11(2) of this Act and within a period of 14 days

  -the incorporation document shall be registered

 -a certificate shall be given that the LLP is incorporated by the name specified therein

Chapter XI of the LLP Rules 2009 deals with the foreign LLP where it is provided in Rule 34 that:

A Foreign LLP shall within 30 days of establishing a place of business in India file with the Registrar in Form 27 along with documents such as

• A  copy of the certificate of incorporation or registration and other instrument(s) defining the constitution of LLP
• Full address of registered or principal office of LLP in the country of its incorporation
• Full address of office of LLP in India in which it is to be deemed as its principal place of business
• List of partners and designated partners, if any, and the names, addresses of 2 or more Indian residents, authorized to accept service of process and any notices or other documents on behalf of the Company.

3. Wholly Owned Subsidiary

When 100% FDI is permitted under the FDI Policy, no prior approval of the RBI is required. Therefore, a private limited company (as a subsidiary of a foreign company) may be incorporated by way of registration with the ROC and the shares will be held by the foreigners.  It must have a minimum of 2 directors and 2 shareholders. At least one director has to be a Resident of India and its citizen.

Chapter XXII of the Companies Act 2013 contains provisions for Companies Incorporated Outside Of India

Click Above

• S.380 – Documents to be delivered to the Registrar within 30 days of the establishment of place of business in India

1. A certified copy of the charter, statutes or memorandum and articles or other instrument defining the constitution of the Company. If not in English, a certified translation will be given
2. Full address of the registered or principal office.
3. List of directors and secretary of the Company.
4. Names and addresses of one or more Indian residents authorized to accept service of process, any notices or other documents served on the Company.
5. Full address of company office in India deemed to be its principal place of business in India
6. Particulars of opening and closing of a place of business in India on an earlier occasion(s) 
7. Declarations that none of the directors or authorized representative in India has ever been convicted or debarred from the formation of companies and management in India or abroad
8. Any other information as may be prescribed

This has to be read with The Companies (Registration Of Foreign Companies) Rules 2014.

• s.385 provides for the fees to be paid to the Registrar for registering any document required by this Chapter to be registered by such fee as may be prescribed  which shall be as provided in the Companies(Registration Offices and Fees) 2014 

4. Branch Office (BO) 

A Branch Office – in relation to a company, means any establishment which has been described as such by the company.

It is set up by a foreign company to carry out its branch activities in India.

The permissible activities of a BO are stated in Schedule I to the Foreign Exchange Management (Establishment in India of a Branch Office or a Liaison Office or a Project Office or any other place of business) Regulations, 2016

The foreign company will have to seek approval of Reserve Bank Of India before establishing BO. RBI will take the criterion of –

1. Profit making a record in the immediately preceding 5 financial years in its home country
2. Net worth to be not less than USD 100,000 or its equivalent.

After being registered with RBI, the BO ought to get itself registered with the Ministry of Corporate Affairs (MCA) if it so wishes to be registered as an establishment of a foreign company in India. The documents which shall be filed with the ROC are as follows

• • Form 44
  • Charter, statutes, MoA, AoA or other instrument defining the company’s constitution
  • Details of Directors – Individuals and Body Corporates
  • RBI approval letter
  • Details of Secretaries
  • Power of Attorney or Board Resolution in favour of the authorized representative(s)

5. Liaison Office (LO) 

A Liaison Office is a place of business that acts as a channel of communication between the Head Office and entities in India but which doesn’t undertake any commercial or trading or industrial activity, whether directly or indirectly, and it maintains itself out of inward remittances received from abroad through normal banking channel

The permissible activities of a LO are stated in Schedule II to the Foreign Exchange Management (Establishment in India of a Branch Office or a Liaison Office or a Project Office or any other place of business) Regulations, 2016.

RBI’s Criterion for approval of LO — 

• A profit making track record of the immediately preceding 3 financial years in its home country and
• Net worth to be not less than USD 50,000 or its equivalent

Once the conditions for the establishment of LO are met i.e after approval from RBI, then within 30 days of establishment, the LO must register itself with the Registrar and provide the following documents:

• A notarized and apostilled copy of the LO charter or MoA and AoA in English;
• Full address of the principal place of operation outside India
• Name, address of LO in India
• List of Directors
• Name, address of the company’s official representative based in India
• RBI’s approval letter

6. Project Office(PO) 

A ‘Project Office’ means a place of business in India which is established to represent the interests of the foreign company in order to execute a project in India and this excludes a Liaison Office.

RBI’s criterion for approval of PO:

• The project has to be funded directly by inward remittance from abroad, or
• The project is to be funded by a bilateral or a multilateral international financing agency
• Clearance from an appropriate authority has to be obtained
• For the project, an Indian company or entity awarding the contract has been granted Term Loan by a Public Financial Institution or a bank in India

After approval from RBI, within 30 days of the establishment of PO, these documents need to be submitted to the ROC for Registration:

• RBI’s permission
• Notarized or consularised copy of the certificate of Incorporation, MoA, AoA of Foreign Company. 
• Notarized or consularized copy of Power of Attorney in favour of an Indian Resident, authorizing himself to accept service of process and any notices or other documents on behalf of the Company.
• List of directors of the Company, notarized or consularized, containing all their particulars.
• KYC of Shareholders holding more than 10% equity in Applicant Company
• Notarized or consularized copy of extracts of Foreign Company’s Board Resolution

Conclusion

Thus, the different ways that a foreign company may establish its place of business in India has been listed. A brief overview of the registration requirements and other compliances that have to be met has also been provided.

References

1. 1. Limited Liability Partnership Act 2008 and Limited Liability Partnership Rules 2009
   2. Companies Act 2013
   3. Foreign Exchange Management (Establishment in India of a Branch Office or a Liaison Office or a Project Office or any other place of business) Regulations, 2016.
   4. https://www.mondaq.com/india/CorporateCommercial-Law/369096/Establishment-Of-Branch-Office-In-India
   5. https://www.mondaq.com/india/CorporateCommercial-Law/878498/Opening-Of-Liaison-Offices-In-India
   6. https://www.businesspivot.in/project-office

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