Establishment Of Foreign Company in India and Its Related Compliances

India has cheap human labour, land, water, electricity in abundance, which lures many foreign companies to establish their place of business in India also. Like other companies operating their businesses in India, foreign companies must comply with some rules and regulations. In this text, we have tried to cover almost every requirement to be complied with by a foreign entity according to the Companies Act, 2013.

First, let's go through the definition of a Foreign company to understand which company falls under its ambit-

What is a Foreign Company?

Foreign company means a company or a body corporate incorporated outside India which—

-is having a place of business in India whether by itself or through an agent, physically or through electronic mode; and

- is conducting any business activity in India in any other manner.

So, it can be concluded that the mere visual presence of a foreign company doing business in India falls under the ambit of this definition.

It is to be noted here that as per the Companies (Registration Offices and Fees) Rules, 2014, any document which a foreign company is required to deliver to the Registrar is to be delivered to the Registrar of New Delhi irrespective of where it operates its business in India.

How Registration of Foreign Company in India is taken?

After establishing a place of business in India, for the purpose of its registration, a foreign company is required to file a form (FC-1) with the registrar (within 30 days) and deliver to the registrar certain documents-

a) its charter documents (in English);

b) address of the registered/principal office of the company;

c) a list of all the directors and secretaries;

d) the name(s) and address(es) of the person(s) resident in India and authorised to receive all notices or other documents on behalf of the company;

e) address of the place of business in India;

f) details of opening and closing of a place of business in India on an earlier occasion(s);

g) declaration that no director of the company or the authorised representative in India has ever been or is convicted or debarred from forming the companies and management in India or abroad; and

h) any other details

On the successful filing of this form, a Foreign Company Registration Number will be generated, and a certificate of registration will also be given to the company.

The list of directors and secretaries shall contain the following information about the directors-

- full name

-any former name or surname

-father's / mother's name

-spouse's name

-date of birth

-residential address

-nationality (current and of origin if any)

-income tax PAN (if any)

-occupation

-directorship details in other companies

-Membership Number (for Secretary only)

-passport number, date of issue and country of issue

-email id

How alteration in the documents of Foreign Company's place of business is made?

If any alteration is being made in the documents mentioned above, the company must intimate about the changes to the Registrar within 30 days of such changes being made. This intimation is to be made by filing Form FC-2. The attachments (in English) required are-

1) Certified copy of the Board resolution, if any

2) Copy of the resolution passed in General Meeting

3) Copy of approval letter (if any approval is required for such alteration).

4) Particulars of alterations in the place of business in India of the company

5) Particulars of alteration in details of the directors or secretaries

6) Particulars of alterations in details of the company authorised representative

7) Any other information can be provided as an optional attachment(s).

How Financial Statements are prepared?

Financial statements of Indian business carried on by a foreign company shall be prepared in accordance with Schedule III, and other documents shall be attached as prescribed under the rules applicable and delivered within six months from the end of the financial year. The registrar may extend this period of six months for a period not exceeding three months. These statements are filed in Form FC-3.

How Audit of Accounts is dealt?

The company's accounts relating to the Indian business shall be audited by a practising chartered accountant or a firm/LLP of practising chartered accountants.

Is it required to give details of all the places where business is conducted?

Along with the financial statements, the company is also required to provide details about all its places where it is conducting business in India as on the date of the balance sheet in Form FC-3

Attachments (in English)-

1) Consolidated financial statement of the company (Mandatory).

2) Copy of balance sheet and profit and loss account (Mandatory).

3) Details of related party transactions

4) Details of repatriation of profits

5) Details of transfer of funds

6) Approval letter obtained for every establishment in India

7)Any other information (optional attachment).

Whether Annual Return is to be filed? What are the attachments required?

The annual return shall be filed within sixty days from the last day of the financial year to the registrar in Form FC-4.

Attachments-

1) Details of Promoters, Directors and Key managerial personnel and changes related to the previous financial year.

2) Details of Directors and key managerial personnel and their remuneration.

3) Details of the meeting of the members or class thereof, board and its various committees along with attendance details. (Mandatory)

4) Details of members and debenture holders and changes therein since the close of the previous financial year. (Mandatory)

5) Details of holding, subsidiary and associate companies and firms.

6) Details about Penalties / Punishment/ Compounding of offences if any. (optional)

7) Any other information can be provided as an optional attachment(s).

What is FCRN?

Corporate Identity Number (CIN) work as a unique identifier of an Indian company. Foreign Company Registration Number (FCRN) is a unique identifier in the case of a Foreign Company. It is a Six-digit number. Foreign Company Registration Number (FCRN) is generated consequently upon approval of eForm FC-1.

What is the relevance of DIN?

DIN is not mandatory for directors of foreign companies having branch offices in India.

Many foreign companies have already registered themselves in India and are setting up their businesses on a large scale. The process to be followed is less cumbersome than establishing an Indian company in India.

Hope this article helps you with the process of establishing a business in India by a foreign company.

Authored by CA Manish Gupta & assisted by Khushi Khandelwal
For any queries or suggestions, reach at info@manishanilgupta.com

Disclaimer!

This article is meant purely for knowledge and educational purposes. It contains only general information and references to legal content. It is not legal advice, and should not be treated as such.