Companies Incorporated Outside India:
Right from days of East Bharat Company strange companies were incorporating companies inward India. After the liberalization policy Indian companies equally good started incorporating subsidiaries exterior India. Recently many strange companies get got shown involvement to opened upward branch business office or liaison business office to monitor their business organization inward India. In instance they opt to contain a subsidiary society inward Bharat they get got to follow the procedures given nether the Companies Act, together with equally good the provisions of the human activity volition apply inward to after the society is incorporated. If a society incorporated exterior Bharat wishing to get got a home of institution inward Bharat without incorporating dissever society for diverse reasons together with then it has to follow the procedures set downwards inward Part XI-sections 591 to 602.
The Act, which has been enacted to oversee the performance of companies inward India, draws heavily from the United Kingdom's Companies Acts together with although similar, is to a greater extent than comprehensive. The Registrar of Companies (ROC) together with the Company Law Board (CLB), both working nether the Department of Company Affairs, ensure compliance amongst the Act. Sections 592 to 602 of the Companies Act of Bharat closely follows sections 406 to 423 of the English linguistic communication Act barring sections 408, 416 to 418 of the act.
Foreign Companies:
A strange society is a society which is incorporated inward a province exterior Bharat nether the constabulary of that other province together with has a home of business organization inward India. Sections 591 to 602 of the Act bargain amongst such companies.
Foreign Companies are of ii classes namely:
Companies incorporated exterior India, which get got established a home of business organization inward Bharat after Apr 1, 1956; together with
Companies incorporated exterior India, which get got established a home of business organization inward Bharat before that appointment together with exit on to get got an established home of business organization inward India.
Part XI of the Companies Act, 1956 containing Section 591 to 608 deals amongst the Companies incorporated exterior Bharat i.e. a "Foreign Company." The provisions of this portion of the Companies Act, 1956 prescribes that its Sections 592 to 602 shall hold out applicable to Companies who are incorporated exterior Bharat which after the showtime of the Companies Act, 1956 establishes a home of business organization inside Bharat together with Companies incorporated exterior Bharat having established home of business organization inside Bharat prior to the showtime of the Companies Act, 1956 together with exit on to get got the said establishment. It says that a Company incorporated exterior Bharat together with having an established home of business organization inward Bharat inward which 50% or to a greater extent than paid upward part upper-case letter is held past Indians together with then provisions of those sections shall apply to such Companies also.
Sections 592 to 602 applicable to such Foreign companies furnish that they get got to file amongst the Registrar of Companies:
- Various documents giving particulars,
- Returns regarding whatsoever alterations inward the company,
- Balance-sheet together with Profit & Loss Accounts of the company,
- Charges on whatsoever of the Companies' properties inward India.
It equally good provides that the next provisions shall apply to Indian business organization of a Foreign Company:
- Registration of charges,
- Right to obtain copies of together with inspect the trust deed,
- Books of business organization relationship to hold out kept past the Company,
- Annual returns to hold out made past the Company,
- Inspection of books of accounts,
- Power of Central Government to direct special audit,
- Audit of price accountants,
Power of Registrar to phone band for inspection together with investigation
(Contained inward Sections 124 to 145, 125, 127, 118, 209, 159, 209-A,, 233-A, 233B, together with 234 to 246 of the Companies Act)
Section 603 of the said portion XI puts certainly restriction on a strange society offering documents for subscriptions inward India.
Though nether the Companies Act, 1956, no formalities are required to hold out carried out for a Foreign Company establishing home of business organization inward Bharat except the filing of the documents provided for inward Part XI; nether the provisions of Section 29 of the Foreign Exchange Regulation Act, 1973 full general or special permission of the Reserve Bank of Bharat for continuing whatsoever home of business organization or establishing whatsoever home of business organization for carrying on activities of merchandise together with Commercial nature past a strange society is required.
General:
The boundary of the strange equity inward an Indian Company is at nowadays increased upward to 51% from the before 40%. In certainly cases 100% strange equity participation is equally good at nowadays allowed. The Government of Bharat has entered into agreements amongst major strange countries including USA for avoiding double taxation.
Section 592 simply deals amongst the requirements of filing diverse documents together with data amongst the Registrar of Companies. The Registrar, for the purpose of this section, is the Registrar of Companies, Delhi together with equally good the Registrar of Companies of the State inward which the home of business organization is situated. The filing has to hold out done inside 30 days of the institution of the home of business. Foreign companies are required to file 1 set of documents amongst the Registrar of Companies, Delhi together with the other set of documents amongst the Registrar of Companies of the State inward which the society has established its home of business. Filing fee of Rs. 5000 has to hold out paid solely at ROC Delhi together with no filing fee hold out paid for filing re-create amongst the other ROC.
If the society establishes whatsoever branch or branches of its business organization inward India, no farther data require hold out given, except that amongst the annual accounts the society should deliver 3 copies of a listing of all its places of business organization inward Bharat together with amongst reference to which the accounts are made out.
Every strange society must conspicuously exhibit on the exterior of its every business office or home of business organization inward Bharat its holler ending amongst the words "Limited" or "Private Limited", equally the instance may be, if it is express company, together with the province of its incorporation inward English linguistic communication equally good equally inward the local language.
Where a strange society carries on its business organization inward Bharat through an agent, the agent is required to comply amongst the provisions of this department (592).
A society shall hold out said to get got a home of business organization inward Bharat if it has a specified or identifiable home at which it carries on business organization such equally an office, shop house, get downwards or other premises having some concrete connectedness betwixt locality together with its business.
594. ACCOUNTS OF FOREIGN COMPANY.
The provisions concerning the accounts of a strange society are detailed inward department 594. It lays downwards the full general obligation - in 1 trial inward every calendar twelvemonth to brand out a residual canvas together with turn a profit together with loss business organization relationship inward honor of its Indian business, nether the presumption that it were an Indian company, giving details equally good of its subsidiaries together with to deliver 3 copies of the documents to the Registrar. When non inward English, a certified translation should equally good hold out annexed. A listing of all places of business organization established past the strange society inward Bharat amongst reference to which the residual canvas is made out should equally good hold out sent regularly.
In other words, the strange society shall hold books of accounts of its Indian business organization together with file, every year, 3 copies of its earth accounts (within nine months from the shut of the fiscal year), Indian business organization accounts (within nine months from the shut of the fiscal year) together with a listing of places of business organization established inward India.
In honor of its Indian business, the strange society is required to hold at its principal home of business organization inward India, proper books of accounts amongst honor to all sums of coin received together with expended past the society together with the matters inward honor of which the receipt together with expenditure convey place, all sales together with purchases of goods past the company, together with all assets together with liabilities of the company
Where the strange society sets upward a liaison business office inward India, it shall ready a "statement of receipts together with payments" together with a "statement of assets together with liabilities" instead of a residual canvas together with turn a profit together with loss account. These shall hold out inward the prescribed cast together with shall hold out duly audited, the auditor giving his study equally to the truth together with fairness of the receipt together with payments during the fiscal year
The Government has granted several exemptions together with made modifications inward regard to the above, inward the lite of its full general policy equally to strange companies. Exemptions are equally good given to liaison offices. Special clarifications are issued inward regard to strange shipping, airline together with insurance companies together with equally good merchandise together with industrial activities of strange companies
The documents are to hold out filed amongst the Registrar inside a flow of nine months of the shut of the fiscal twelvemonth of the strange society or inside such flow equally extended past the Registrar non exceeding 3 months.
Provisions Relating To Foreign Companies:
(1) Foreign companies which, after the showtime of this Act, found a home of business organization inside Bharat shall, inside 30 days of the institution of the home of business, deliver to the Registrar for registration -
(a) a certified re-create of the charter, statutes, or memorandum together with articles, of the society or other musical instrument constituting or defining the constitution of the company; and, if the musical instrument is non inward the English linguistic communication language, a certified translation thereof;
(b) the total address of the registered or principal business office of the company;
(c) a listing of the directors together with secretarial assistant of the company, containing the particulars mentioned inward sub-section (2);
(d) the holler together with address or the names together with addresses of some 1 or to a greater extent than persons resident inward India, authorized to convey on behalf of the society service of physical treat together with whatsoever notices or other documents required to hold out served on the company; and
(e) the total address of the business office of the society inward Bharat which is to hold out deemed its principal home of business organization inward India.
(2) The listing referred to inward clause
(c) of sub-section
(1) shall contain the next particulars, that is to say :-
(a) amongst honor to each director, -
(i) inward the instance of an individual, his acquaint holler together with surname inward full, whatsoever onetime holler or names together with surname or surnames inward full, his common residential address, his nationality, together with if that nationality is non the nationality of origin, his nationality of origin, together with his business organization occupation, if any, or if he has no business organization line of piece of work but holds whatsoever other directorship or directorships, particulars of that directorship or of some 1 of those directorships; and
(ii) inward the instance of a trunk corporate, its corporate holler together with registered or principal office; together with the total name, address, nationality, together with nationality of origin, if unlike from that nationality, of each of its directors;
(b) amongst honor to the secretary, or where at that topographic point are articulation secretaries, amongst honor to each of them -
(i) inward the instance of an individual, his acquaint holler together with surname, whatsoever onetime holler or names together with surname or surnames, together with his common residential address; and
(ii) inward the instance of a trunk corporate, its corporate holler together with registered or principal business office :
Provided that, where all the partners inward a business solid are articulation secretaries of the company, the holler together with principal business office of the business solid may hold out stated instead of the particulars mentioned inward clause (b) of this sub-section.
(3) Clauses (2) together with (3) of the Explanation to sub-section (1) of department 303 shall apply for the purpose of the structure of references inward sub-section (2) to acquaint together with onetime names together with surnames equally they apply for the purposes of the structure of such references inward sub-section (1) of department 303.
(4) Foreign companies, other than those mentioned inward sub-section (1), shall, if they get got non delivered to the Registrar before the showtime of this Act the documents together with particulars specified inward sub-section (1) of department 277 of the Indian Companies Act, 1913 (7 of 1913), exit on to hold out field of study to the obligation to deliver those documents together with particulars inward accordance amongst that Act.
When whatsoever modify occurs inward the inward a higher home particulars, the Registrar must hold out intimated accordingly. According to department 596 whatsoever process, notice, or other document required to hold out served on a strange society shall hold out deemed to hold out sufficiently served, if addressed to whatsoever someone whose holler has been delivered to the Registrar nether the foregoing provisions of this Part together with left at, or sent past mail service to, the address which has been therefore delivered:
Provided that -
(a) where whatsoever such society makes default inward delivering to the Registrar the holler together with address of a someone resident inward Bharat who is authorized to convey on behalf of the society service of process, observe or other documents; or
(b) if at whatsoever fourth dimension all the persons whose names together with addresses get got been therefore delivered are dead or get got ceased therefore to reside, or turn down to convey service on behalf of the company, or for whatsoever reason, cannot hold out served;
a document may hold out served on the society past leaving it at, or sending it past mail service to, whatsoever home of business organization established past the society inward India.
The Indian accounts get got to hold out drawn upward inward Indian rupees equally per the requirements of Schedule VI.
Under Regulation 22 of the Companies Regulations, 1956 the registrar having jurisdiction over Delhi must hold a Register of Foreign Companies inward Form III. In that the names of strange companies must hold out entered inward the gild inward which the documents referred to inward department 592 of the Companies Act are delivered to the Registrar.
The society has to address all communication to The Registrar of Companies, NCT of Delhi together with Haryana.
Court's jurisdiction:
The jurisdiction volition hold out decided amongst reference to the filing of documents together with data pursuant to Section 592. Clause (d) of sub-section (1) requires the strange companies to furnish particulars nearly the names together with addresses of some persons on whom notices tin plough over notice hold out served insofar equally the strange society is concerned.
In the instance of amalgamation of branch of a strange society inward Bharat amongst the transferee society jurisdiction of High Court for sanctioning nether department 391/394 read amongst department 591 together with 597(1) it is the jurisdiction of registered business office or home of business organization which would determine the jurisdiction of whatsoever High Court to entertain the petition for approving of amalgamation system nether department 391/394 together with non Delhi. [Bank of Muscat S.A.O.G, In re. (2004) sixty CLA 325 (Kar.)]
Establishment of Place of Business inward India- FEMA Requirements:
The Foreign Exchange Management Act, 1999(FEMA) has framed Regulations relating to establishing whatsoever home of business organization inward India. The Foreign Exchange Management (Establishment inward Bharat of Branch or Office or other home of business) Regulations, 2000 (Regulations) provides for institution past a non-resident whatsoever home of business, which would hold out a Liaison business office or Project business office or site business office or branch office.
In price of the Regulation the next ii points are noteworthy:
No someone resident exterior Bharat shall, without prior approving of the Reserve Bank found inward Bharat whatsoever home of business-be it branch or a liaison business office or a projection business office or whatsoever other business organization past whatever holler called.
Citizens of Pakistan, Bangladesh, Sri Lanka, Afghanistan, Islamic Republic of Iran or mainland People's Republic of China cannot found whatsoever home of business- hold out it branch or a liaison business office or a projection business office or whatsoever other business organization past whatever holler called, unless they procure RBI permission inward this regard.
Place of Business-what they are?:
The Regulations define diverse home of business organization equally under-
'Liaison Office' agency a home of business organization to human activity equally a channel of
communication betwixt the Principal home of business organization or Head Office past
whatever holler called together with entities inward Bharat but which does non undertake
any commercial /trading/ industrial activity, straight or indirectly, together with
maintains itself out of inward remittances received from abroad through
normal banking channel.
'Project Office' agency a home of business organization to stand upward for the interests of the
foreign society executing a projection inward Bharat but excludes a Liaison
Office.
'Site Office' agency a sub-office of the Project Office established at the
site of a projection but does non include a Liaison Office.
Thus, spell a Liaison business office is solely a channel for facilitating communication betwixt the principal entity abroad together with that inward India, existing without whatsoever commercial activity the Project business office is 1 for executing specific projects inward India. A Site business office is an extension of projection business office inward the really site where the piece of work is done.
"Branch office", inward relation to a society agency -
(a) whatsoever institution described equally a branch past the company; or
(b) whatsoever institution carrying on either the same or substantially the same activity equally that carried on past the caput business office of the company; or
(c) whatsoever institution engaged inward whatsoever production, processing or manufacture,
but does non include whatsoever institution specified inward whatsoever gild made past the Central Government nether department 8.
Forms together with Procedure:
A someone resident exterior Bharat desiring to found a branch or liaison or projection business office inward Bharat shall apply to the Reserve Bank inward cast FNC 1. In honor of Project office, the someone resident exterior Bharat should get got secured from an Indian society a contract to execute a projection inward Bharat together with the projection is funded straight past a bilateral or multilateral International Financing Agency or the projection has been cleared past an appropriate potency or a society or entity inward Bharat awarding the contract has been granted term loan past a Public Financial Institute or a banking company inward Bharat for the project.
Permitted activities:
Paragraph half-dozen of the Regulations sets out the activities to hold out undertaken past a branch or other business office inward India. Schedule I of the regulations details the activities that tin plough over notice hold out carried out past Branch together with Schedule II listing out the activities that tin plough over notice hold out carried out past liaison office. Except when permitted past RBI, the branch or liaison business office shall comport out no other activity, other than those specifically permitted past these schedules.
As per Schedule I of the Regulations the next are the permitted activities for a branch inward Bharat of a someone resident exterior India:
Export/Import of goods
Rendering professional person or consultancy services.
Carrying out enquiry work, inward which the rear society is engaged.
Promoting technical or fiscal collaborations betwixt Indian companies together with rear or overseas grouping company.
Representing the rear society inward Bharat together with acting equally buying/selling agent inward India.
Rendering services inward Information Technology together with evolution of software inward India.
Rendering technical back upward to the products supplied past parent/group companies.
Foreign airline/shipping company.
In price of Schedule II a liaison business office inward Bharat of a someone resident exterior Bharat is permitted to comport out the next activities:
Representing inward Bharat the rear company/group companies.
Promoting export import from/to India.
Promoting technical/financial collaborations betwixt parent/group companies together with companies inward India.
Acting equally a communication channel betwixt the rear society together with Indian companies.
Remittance of Profit or Surplus:
A someone resident exterior Bharat permitted past the Reserve Bank nether Regulation 5, to found a branch or Project Office inward Bharat may remit exterior Bharat the turn a profit of the branch or surplus of the Project on its completion, cyberspace of applicable Indian taxes, on production of the next documents, together with establishing the cyberspace turn a profit or surplus, equally the instance may be, to the satisfaction of the authorized dealer through whom the remittance is effected.
For remittance of turn a profit of a branch, -
a) certified re-create of the audited balance-sheet together with turn a profit together with loss business organization relationship for the
relevant year;
b) a Chartered Accountant's certificate certifying, -
i) the fashion of arriving at the remittable profit,
ii) that the entire remittable turn a profit has been earned past task the
permitted activities, and
iii) that the turn a profit does non include whatsoever turn a profit on revaluation of the assets
of the branch.
For remittance of surplus on completion of the Project, -
certified re-create of the last audited Project accounts;
a Chartered Accountant's certificate showing the fashion of arriving at the remittable surplus;
income taxation assessment gild or either documentary show showing payment of income taxation together with other applicable taxes, or a Chartered
Accountant's certificate stating that sufficient funds get got been set aside for coming together all Indian taxation liabilities; together with
auditor's certificate stating that no statutory liabilities inward honor of the Project are outstanding.