Companies incorporated Outside India – CA Final Law Study Material

Companies incorporated Outside India – CA Final Law Study Material is designed strictly as per the latest syllabus and exam pattern.

Companies incorporated Outside India – CA Final Law Study Material

Question 1.
Examine with reference to the provisions of the Companies Act, 2013 whether the following companies can be treated as foreign companies:
(i) A company incorporated outside India having a share registration office at Mumbai.
(ii) Indian citizens incorporated a company in Singapore for the purpose of carrying on business there. [MTP-April 18]
Answer:
Determination of status of foreign company:

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.

As per Sec. 386 of Companies Act, 2013 interpreted the expression “Place of business” as including a share transfer or registration office.

Accordingly, to qualify as foreign company, a company must have the following features:

It must be incorporated outside India.
It should have a place of business in India.
Place of Business may be hold by the company directly or through its agent.
Place of business may be physically or through electronic mode.
It must conduct a business activity of any nature in India.

Conclusion:

As place of business includes a share registration office, the company will be treated as foreign company provided it conducts any business activity in India.
As the company is incorporated for the purpose of carrying business in Singapore, it cannot be treated as a foreign company as no place of business in India.

Question 2.
Indian citizens incorporated a company in U.K. for the purpose of carrying on business there. Examine with reference to the relevant provisions of the Companies Act, 2013 whether it is a “Foreign Company”. What would be your answer in case the U.K. company was incorporated-by a company registered in India? [Nov. 08 (5 Marks)]
Answer:
Determination of status of foreign company:
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.

Accordingly, to qualify as foreign company, a company must have the following features:

It must be incorporated outside India.
It should have a place of business in India.
Place of business may be hold by the company directly or through its agent.
Place of business may be physically or through electronic mode.
It must conduct a business activity of any nature in India.

Conclusion:

As the company is incorporated for the purpose of carrying business in U.K., it cannot be treated as a foreign company as no place of business in India.
Answer will remain the same, as it is immaterial who incorporate the company.

Question 3.
Examine in the light of the provisions of the Companies Act, 2013 whether the following companies can be considered as “Foreign Companies”:-
(i) A company incorporated outside India having a share registration office at New Delhi
(ii) A company incorporated outside India having shareholders who are all Indian citizens;
(iii) A company incorporated in India but all the shares are held by foreigners.
Also examine whether the above companies can issue Indian Depository Receipts under the provisions of the Companies Act, 2013? [May 13 (8 Marks)]
Answer:
Determination of status of foreign company:

As per Sec. 386 of Companies Act, 2013 interpreted the expression “Place of business” as including a share transfer or registration office.
Conclusion:

As place of business includes a share registration office, the company will be treated as foreign company provided it conducts any business activity in India.
Assuming that company no place of business in India, it cannot be treated as foreign company. It is immaterial that all of its shareholders are Indian Citizens.
As the company is incorporated in India, it cannot be treated as foreign company.

Issue of IDRs:
As per Sec. 390 read with Rule 13 of the Companies (Registration of Foreign Companies) Rules, 2014, no company incorporated or to be incorporated outside India, whether the company has or has not established, or may or may not establish, any place of business in India shall make an issue of IDRs unless it complies with the

conditions mentioned under this rule,
SEBI (ICDR) Regulations, 2009, and
any directions issued by the RBI.

Question 4.
Robertson Ltd. is a company registered in Thailand. Although, it has no place of business established in India, yet it is doing online business through telemarketing in India. Whether it will be treated as a Foreign Company under the Companies Act, 2013? Explain. [Nov. 15 (4 Marks), RTP-May 18]
Or
Radix Ltd. is a company registered in Thailand. Although, it has no place of business established in India, yet it is engaged in online business through remote delivery of healthcare services in India. State the legal position as to the nature of the Radix Ltd. as a foreign company in the light of the Companies Act, 2013. – [MTP-Oct. 20]
Answer:
Determination of status of foreign company:

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.

Rule 2(1)(c) of Companies (Registration of Foreign Companies) Rules, 2014, defines the term electronic mode and electronically based online services such as telemarketing, telecommuting, telemedicine, education and information research are covered within the meaning of electronic mode.

Conclusion: Robertson Ltd. will be treated as Foreign company as it is having place of business electronically and involved in business activity through telemarketing/telemedicine.

Question 5.
In the light of the provisions of the Companies Act, 2013 explain whether the following Companies can be considered as a ‘Foreign Company’:
(i) A Company which has no place of business established in India, yet, is doing online business through telemarketing in India.
(ii) A company which is incorporated outside India employs agents in India but has no place of business in India.
(iii) A Company incorporated outside India having shareholders who are all Indian citizens. [Nov. 18-New Syllabus (8 Marks)]
Answer:
Determination of status of foreign company:
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.

(i) A Company which has no place of business established in India, yet, is doing online business through telemarketing in India will be treated as Foreign company as it is having place of business electronically and involved in business activity through telemarketing.

(ii) A company which is incorporated outside India employs agents in India but has no place of business in India, will not be treated as Foreign company as it is not having any place of business in India.

(iii) A Company incorporated outside India having shareholders who are all Indian citizens, cannot be treated as foreign company. As it is not having any place of business in India. It is immaterial that all of its shareholders are Indian Citizens.

Question 6.
In the light of the provisions of the Companies Act, 2013, examine whether the following companies can be considered as a ‘Foreign Company’:
(i) M/s Red Stone Limited is a company registered in Singapore. The Board of Directors meets and executes business decisions at their Board Meeting held in India.
(ii) M/s Blue Star Public Company Limited registered in Thailand has authorized Mr. ‘Y’ in India to find customers and to enter contracts with them on behalf of the Company.
(iii) M/s. Xex Limited Liability Company registered in Dubai has installed its main server in Dubai for maintaining office automation software by Cloud Computing for its client in India. [Nov. 19 – New Syllabus (8 Marks)]
Answer:
Determination of status of foreign company:

Accordingly, to qualify as foreign company, a company must have the following features:

It must be incorporated outside India.
It should have a place of business in India.
Place of Business may be hold by the company directly or through its agent.
Place of business may be physically or through electronic mode.
It must conduct a business activity of any nature in India.

Rule 2(1)(c) of Companies (Registration of Foreign Companies) Rules, 2014, defines the term electronic mode so as to mean carrying out electronically based,
(a) business to business and business to consumer transactions, data interchange and other digital supply transactions;
(b) offering to accept deposits or inviting deposits or accepting deposits or subscriptions in securities, in India or from citizens of India;
(c) fihancial settlements, web-based marketing, advisory and transactional services, database services and products, supply chain management;
(d) online services such as telemarketing, telecommuting, telemedicine, education and ’ information research; and
(e) all related data communication services,
whether conducted by e-mail, mobile devices, social media, cloud computing, document management, voice or data transmission or otherwise.
It is immaterial whether the main server is installed in India or outside India.

Conclusion: Based on the provisions as stated above, following conclusions may be drawn:
(i) M/s Red Stone Limited is not a foreign company as holding Board meetings in India in itself cannot established that company is conducting any business activity in India.

(ii) M/s Blue Star Public Company Limited registered in Thailand will be considered as foreign company as it has authorized Mr. ‘Y’ in India to find customers and to enter contracts with them on behalf of the Company.

(iii) M/s. Xex Limited Liability Company registered in Dubai will be considered as foreign company as it is engaged in maintaining office automation software by Cloud Computing for its client in India. Location of server is immaterial.

Question 7.
Trans Asia Limited is registered as a public company u/s 4(7) of the erstwhile Companies Act, 1956 which is a subsidiary of Galilio Limited, a foreign company. Trans Asia Limited carries in business in India describing itself as a foreign company. Can it do so? State the actions that can be taken against the company for improper use or description as foreign company under the provisions of the Companies Act, 2013. [Nov. 18-Old Syllabus (4 Marks)]
Answer:
Action for Improper Use or Description as Foreign Company:

As per Sec. 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.

In instant case, Trans Asia Limited is registered as a public company u/s 4(7) of the erstwhile Companies Act, 1956 which is a subsidiary of Galilio Limited, a foreign company.

Conclusion: As trans Asia Limited is registered in India, hence it cannot describe itself as a foreign company merely on the basis that it is a subsidiary of a foreign company.

As per Rule 12 of Companies (Registration of Foreign Companies) Rules, 2014, if any person trade or carry on business in any manner under any name or title or description as a foreign company registered under the Act or the rules made thereunder, that person shall, unless duly registered as foreign company under the Act and rules made thereunder, shall be liable for investigation u/s 210 of the Act and action consequent upon that investigation shall be taken against that person.

Question 8.
Puresoft Solutions Private Limited is incorporated in Singapore and more than 60% of the paid-up share capital is held by two citizens of India who are Software Engineers. The company wants to open a branch office in Kolkata.
Determine the status of Puresoft Solutions as per the provisions of the Companies Act, 2013.
[Nov. 20 – Old Syllabus (2 Marks)]
Answer:
Determining status of a foreign company:
As per Sec. 379(2) of Companies Act, 2013, where not less than 50% of the paid-up share capital, whether equity or preference or partly equity and partly preference, of a foreign company is held by:
(i) one or more citizens of India;
or
(ii) by one or more companies or bodies corporate incorporated in India;
or
(iii) by one or more citizens of India and one or more companies or bodies corporate incorporated in India,

whether singly or in the aggregate, such company shall comply with the provisions of Chapter XXII (Section 379 to Sec. 393 – Companies Incorporated outside India) and such other provisions of this Act as may be prescribed with regard to the business carried on by it in India as if it were a company incorporated in India.

Conclusion: As more than 60% of the paid up capital of Puresoft Solutions Pvt. Ltd. is being held by Citizens of India, company is required to comply with the provisions of Secs. 379 to 393 and such other prescribed provisions of this Act with regard to business carried by it in India as it were as company incorporated in India.

Question 9.
A company incorporated in Singapore has established its place of business at Chennai. State the documents which are required to be furnished on such establishment of business in India under the Companies Act, 2013 and the authorities to whom such documents are to be furnished. [May 09 (5 Marks)]
Or
DEJY Company Limited incorporated in Singapore, desires to establish a place of business at Mumbai. You being a practicing Chartered Accountant has been appointed by the company as a liaison officer, for compliance of legal formalities on behalf of the company. Examining the provisions of the Companies Act, 2013, state the documents you are required to furnish on behalf of the company, on the establishment of a place of business at Mumbai. [May 12 (8 Marks), RTP – May 19]
Or
State the documents that are required to be delivered by a foreign company at the time of I establishment of a place of business in India. State to whom the said documents are to be delivered. [May 14 (4 Marks)]
Answer:
Documents to be furnished by a foreign company:
Section 380(1) of Companies Act, 2013 requires that every foreign company shall, within 30 days of the establishment of its place of business in India, deliver to the Registrar for registration:

(a) Certified copy of the instrument constituting or defining the constitution of the company. If the instrument is not in the English language, a certified translation thereof in the English language.
(b) Full address of the registered or principal office of the company.
(c) List of the directors and secretary of the company containing such particulars as may be prescribed.
Particulars relating to directors and Secretary to be furnished to the Registrar by foreign Companies are prescribed in Rule 3(2) of the Companies (Registration of Foreign Companies) Rules, 2014.
(d) Name and address of one or more persons resident in India authorised to accept on behalf of the company service of any notices or other documents required to be served on the company.
(e) 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(s).
(g) Declaration that none of the directors of the company or the authorized representative in India has ever been convicted or debarred from formation of companies and management in India or abroad; and –
(h) Any other information as may be prescribed.

Office where documents to be delivered
Rule 8 of the Companies (Registration of Foreign” Companies) Rules, 2014 provides that any document, which any foreign company is required to deliver to the Registrar shall be delivered to the Registrar having jurisdiction over New Delhi.

Question 10.
ABC Ltd., a foreign company having its Indian principal place of business at Kolkata, West Bengal is required to deliver various documents to Registrar under the provisions of the Companies Act, 2013. You are required to state, where the said company should deliver such documents. [MTP-April 18]
Answer:
Office where documents to be delivered by a foreign company:
Rule 8 of the Companies (Registration of Foreign Companies) Rules, 2014 provides that any document, which any foreign company is required to deliver to the Registrar shall be delivered to the Registrar having jurisdiction over New Delhi.

Question 11.
M/s Joel Ltd. was incorporated in London with a paid-up capital of 10 million pounds. Mr. Y an Indian citizen holds 25% of the paid-up capital. M/s. X Ltd. a company registered in India holds 30% of the paid-up capital of Joel Ltd. M/s. Joel Ltd. has recently established a share transfer office at New Delhi. The company seeks your advice as to what formalities it should observe as a foreign company under Companies Act, 2013.
Or
Mr. Ziyan an Indian citizen holds 25% of the paid-up capital of Laurel Steven Limited, a company which was incorporated in Singapore with a paid-up capital of 10 million Singapore Dollars. Swaraj Limited a company registered in India holds 30% of the paid-up capital of Laurel Steven Limited. Laurel Steven Limited has recently established a share transfer office at New Delhi. The Company seeks your advice as to what formalities it should observe as a foreign company under the Companies Act, 2013. [Nov. 17 (4 Marks)]
Answer:
Formalities to be observed by a foreign company:

As per Sec. 386 of Companies Act, 2013 interpreted the expression “Place of business” as including a share transfer or registration office.

As per Section 379 of Companies Act, 2013, where not less than 50% of the paid-up share capital, whether equity or preference or partly equity and partly preference, of a foreign company is held by one or more citizens of India or by one or more companies or bodies corporate incorporated in India, whether singly or in the aggregate, such company shall comply with the provisions of Chapter XXII (Section 379 to Sec. 393 – Companies Incorporated outside India) and such other provisions of this Act as may be prescribed with regard to the business carried on by it in India as if it were a company incorporated in India.

Conclusion: As the company is a foreign company as per section 2 (42) read with Sec. 3 86, and more than 5 0% of share capital is held by Indian Citizen and Indian company, it is required to comply with the provisions of Sections 379 to 393 and such other provisions as prescribed for a foreign company.

Formalities to be observed:

Documents to be furnished by a foreign company:
Section 380(1) of Companies Act, 2013 requires that every foreign company shall, within 30 days of the establishment of its place of business in India, deliver to the Registrar for registration:
(a) Certified copy of the instrument constituting or defining the constitution of the company. If the instrument is not in the English language, a certified translation thereof in the English language.
(b) Full address of the registered or principal office of the company.
(c) List of the directors and secretary of the company containing such particulars as may be prescribed.
Particulars relating to directors and Secretary to be furnished to the Registrar by foreign Companies are prescribed in Rule 3(2) of the Companies (Registration of Foreign Companies) Rules, 2014.
(d) Name and address of one or more persons resident in India authorised to accept on behalf of the company service of any notices or other documents required to be served on the company.
(e) 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(s).
(g) Declaration that none of the directors of the company or the authorized representative in India has ever been convicted or debarred from formation of companies and management in India or abroad; and –
(h) Any other information as may be prescribed.

Question 12.
Qinghai Huading Industrial Company Ltd., incorporated in China established a place of business at Mumbai. The Charter/Documents constituting the company is in Mandarian Chinese (Chinese local language). It is required inter alia to file a certified translation of above Documents with the Registrar of companies in India. Who can authenticate the translated charter/documents as per the provisions of the Companies Act, 2013 and rules made there under governing foreign companies in case such translation is made at Mumbai? (May 18 – New Syllabus (2 Marks)]
Answer:
Authentication of Translated Documents:

Rule 10 of the Companies (Registration of Foreign Companies) Rules, 2014 provides that all the documents required to be filed with the Registrar by the foreign companies shall be in English language and where any such document is not in English language, there shall be attached a translation thereof in English language duly certified to be correct in the manner given in these rules.

Where any such translation is made outside India, it shall be authenticated by the signature and the seal, if any, of
(a) the official having custody of the original; or
(b) a Notary (Public) of the country (or part of the country) where the company is incorporated.

Where such translation is made within India, it shall be authenticated by
(a) an advocate, attorney or pleader entitled to appear before any High Court; or
(b) an affidavit, of a competent person having, in the opinion of the Registrar, an adequate knowledge of the language of the original and of English.

Question 13.
Transtar Limited, a company incorporated in Thailand, has a place of business through an agent in Bangalore. The agent transacts the business on behalf of the company through electronic mode. As regards Transtar LimIted, answer the following:
(i) Whether, Transtar Limited shall be called a foreign company within the meaning of the Companies Act, 2013?
(ii) What are the regulatory requirements under the Companies Act, 2013 to be complied with by a company which has establishéd its place of business in India with respect to delivery of documents etc. to Registrar? [Nov. 19 – Old Syllabus (4 Marks)]
Answer:
Determination of Status of foreign company:

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.

Conclusion: Transtar Limited shall be called a foreign company as it has a place of business in India through an agent who transacts the business on behalf of the company through electronic mode.

Regulatory requirements to be complied with bya company which has established its place of business in India with respect to delivery of documents etc. to Registrar:

Question 14.
State briefly the requirements relating to filing of financial statements with the Registrar of Companies by the foreign company in respect of its global business as well as Indian business.
Or
Galillo Ltd. is a foreign company In Germany and It established a place of business in Mumbai. Explain the relevant provisions of the Companies Act, 2013 and rules made thereunder relating to preparation and filing of financial statements, as also the documents to be attached along with the financial statements by the foreign company. [May 16(4 Marks)].
Answer:
Filing of Accounts by Foreign Companies:
As per Sec. 381 of Companies Act, 2013, ever3 foreign company shall, in every calendar year, make out a balance sheet and profit and loss account

in such form as prescribed,
containing such particulars as prescribed, and
including or having attached or annexed thereto such documents as may be prescribed, and
deliver a copy of those documents to the Registrar.

As per Rule 4 of the Companies (Registration of Foreign Companies) Rules, 2014, every foreign company shall prepare F.S. of its Indian business operations in accordance with Schedule III or as near thereto as may be possible for each financial year including:

(i) documents required to be annexed thereto in accordance with the provisions of Chapter IX of the Act ie. Accounts of Companies;
(ii) documents relating to copies of latest consolidated F.S. of the parent foreign company, as submitted by it to the prescribed authority in the country of its incorporation under the provisions of the law for the time being in force in that country.

Additional documents to be attached (Rule 4): Every foreign company shall, along with the F.S. required to be filed with the Registrar, attach thereto the following documents; namely:
a. Statement of related party transaction
b. Statement of repatriation of profits
c. Statement of transfer of funds (including dividends if any).
Time limit for filing (Rule 4): Documents shall be delivered to the Registrar within a period of 6 months of the close of the financial year of the foreign company to which the documents relate.

Service on Foreign Company – Sec. 383

Question 15.
X Inc is a company registered in UK and carrying on Trading Activity with Principal Place of Business in Chennal. Since the company did not obtain registration or make arrangement to file Return, the Registrar having jurisdiction, intends to serve show cause notice on the Foreign Company. As Standing Counsel for the department, advise the Registraron valid service of notice. [Nov. 14(4 Marks), MTP-Aug. 18]
Answer:
Manner of service of notice etc. to foreign company:
As per Sec. 383 of Companies Act, 2013, any notice, or other document required to be served on a foreign company shall be deemed to be sufficiently served,

if it is addressed to any person whose name and address have been delivered to the Registrar
u/s 380 of Companies Act, 2013
and
it isleft at the address which has been so delivered to the Registrar,
or
sent by post to the address which has been so delivered to the Registrar.
or
sent by electronic mode.
Conclusion: Notice may be served in compliance of Sec. 383.

Question 16.
Under Section 387 of the Companies Act 2013, what are particulars required to be incorporated in a prospectus to be issued by an existing foreign company?
Answer:
Particulars to be Incorporated In Prospectus Issued by a foreign company:
Section 387(1) of the Companies Act, 2013 requires the following particulars to be incorporated in the prospectus:
(a) Prospectus must contain particulars with respect to the following matters, namely:

the instrument constituting or defining the constitution of the company
the enactments under which the company was incorporated;
address in India where the said instrument, enactments, or copies thereof, and if the same are not in the English language, a certified translation thereof in the English language can be inspected;
the date on which and the country in which the company would be or was incorporated; and
whether the company has established a place of business in India and, if so, the address of its principal office in India:

Provided that points (1), (ii) and (iii) shall not apply in the case of a prospectus issued more than 2 years after the date at which the company is entitled to commence business.
(b) Prospectus must state the matters specified u/s 26.

Question 17.
Blue Berry Ltd. Is a Company incorporated outside India. 50% of its preference share capital and 20% of Its equity share capital are, held by Companies incorporated in India. It issued prospectus inviting subscriptions in India for its share but did not state the Country in which it is incorporated. Examine in the light of the provisions of the Companies Act 2013 whether the issue of prospectus by the Company in valid. [May 19- Old Syllabus (2 Marks)]
Answer:
Determination of Validity of a prospectus:

As per Section 387(1) of Companies Act, 2013, prospectus issued by a foreign company must contain the particulars with respect to certain matters, including therein the country in which the company was incorporated.
Conclusion: Prospectus issued by Blue Berry Ltd. is not valid as it does not contain the particulars as prescribed u/s 387(1).

Question 18.
Chang Limited, a company incorporated in Singapore proposes to issue prospectus offering its securities in India. The Company has no established place of business in India.

The officer in charge of the issue of the prospectus in India seeks your opinion regarding the provisions relating to registration of the prospectus under the Companies Act, 2013. List out the documents required to be enclosed with the prospectus. [May 18 – Old Syllabus (4 Marks)]
Or
Abroad Ltd. a foreign company without establishing a place of business in India, issued prospectus for subscription of securities in India. Being a consultant of the company advise on the validity of such an issue of prospectus by Abroad Ltd. [MTP-May 20]
Answer:
Documents required to be enclosed with the prospectus:

As per Sec. 389 of the Companies Act, 2013, no person shall issue, circulate or distribute in India any prospectus offering for subscription in securities of a company incorporated or to be incorporated outside India, whether the company has or has not established, or when formed will or will not establish, a place of business in India, unless before the issue, circulation or distribution of the prospectus in India,
(a) a copy thereof certified by the chairperson of the company and two other directors of the company as having been approved by resolution of the managing body has been delivered for registration to the Registrar and
(b) the prospectus states on the face of it that a copy has been so delivered, and
(c) there is endorsed on or attached to the copy, any consent to the issue of the prospectus required by Section 388 and such documents as may be prescribed.

As per Rule 11 of the Companies (Registration of Foreign Companies) Rules, 2014, the following documents shall be annexed to the prospectus, namely:
(a) any consent to the issue of the prospectus required from any person as an expert;
(b) a copy of contracts for appointment of managing director or manager and in case of a contract not reduced into writing, a memorandum giving full particulars thereof;
(c) a copy of any other material contracts, not entered in the ordinary course of business, but entered within preceding 2 years;
(d) a copy of underwriting agreement; and
(e) a copy of power of attorney if prospectus is signed through duly authorized agent of directors.

Question 19.
In case, a foreign company does not deliver its documents to the Registrar of Companies as required u/s 380 of the Companies Act, 2013, state the penalty prescribed under the said Act, which can be levied. [RTP-May 18]
Or
ABC Limited, a foreign company failed to deliver some desired documents to the Registrar of Companies as required under Section 380 of the Companies Act, 2013. State the provisions of penalty prescribed under the said Act, which can be levied on ABC Limited for its failure.
Or
Ronnie Coleman Ltd., a foreign company failed to deliver some documents to the Registrar of Com-panies as required under section 380 of the Companies Act, 2013. State the provisions of penalty prescribed under the Act, which can be levied on Ronnie Coleman Ltd. for its failure to deliver the documents. [Nov. 18-New Syllabus (2 Marks)]
Answer:
Penalty provisions in case of foreign companies:
Section 392 of Companies Act, 2013 provides that if a foreign company contravenes the provisions of this Chapter (Secs. 379 to 393),
(a) the foreign company shall be punishable with

fine which shall not be less than ₹ 1 lakh but which may extend to ₹ 3 lakhs and
in the case of a continuing offence, with an additional fine which may extend to ₹ 50,000 for every day after the first during which the contravention continues and

(b) every officer of the foreign company who is in default shall be punishable with imprisonment for a term which may extend to 6 months or with fine which shall not be less than ₹ 25,000 but which may extend to ₹ 5 lakhs or with both.

Question 20.
North Sea Shipping Limited is incorporated in South Korea. It has established an office in Paradecp. Mr. Jonathan is the Branch in charge and the Compliance Officer in India. He has received a communication from the Chief Executive Officer in South Korea to explore the possibilities of issuing Indian Depository Receipts to the extent of Rs. 1,000 million in financial year 2020-21. He has approached you being financial consultant for your advice.
Advise him as per the provisions of the Companies Act, 2013. [Nov. 20 – Old Syllabus (2 Marks)]
Answer:
Offer of GDRs:
Sec. 390 of Companies Act, 2013 provides that Central Government may make rules for:
(a) the offer of IDR;
(b) the requirement of disclosures in prospectus or letter of offer issued in connection with IDRs;
(c) the manner in which the IDRs shall be dealt with in a depository mode and by custodian and underwriters; and
(d) the manner of sale, transfer or transmission of IDRs,
by a company incorporated or to be incorporated outside India, whether the company has or has not established, or will or will not establish, any place of business in India.

For the purpose of section 390, Rule 13 of the Companies (Registration of Foreign Companies) Rules, 2014 provides that no company incorporated or to be incorporated outside India, whether the company has or has not established, or may or may not establish, any place of business in India shall make an issue of IDRs unless it complies with the

conditions mentioned under this rule,
SEBI (ICDR) Regulations, 2009 and
any directions issued by the RBI.

Companies incorporated Outside India – CA Final Law Study Material

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