Intermediate · Paper 5 – Business Laws & Ethics · Companies Act, 2013 · 2:50
English
Transcript
A company born abroad, but doing business in India. What does Indian law call it? A foreign company!
Sakura Robotics was incorporated in Japan. Now it has opened an office in Chennai, and it also sells robots to Indian buyers through its website.
Anitha: Kenji, your company is Japanese. Does Indian company law apply to you?
Kenji: Hmm, Anitha. Let's find out!
Section 2, clause 42 says a foreign company is any company or body corporate incorporated outside India, which has a place of business in India, by itself or through an agent, physically or through electronic mode, and conducts any business activity in India in any other manner.
Even a share transfer office or a share registration office is a place of business. In the Tovarishestvo case, a foreign company's representatives often stayed in a hotel to buy machinery, so the hotel was held to be its place of business. But merely holding property is not a place of business.
Remember, a foreign company is decided by its place of incorporation. A company incorporated in India is an Indian company, even if all its shareholders are foreigners. And a company incorporated abroad, with Indian shareholders but no business in India, is not covered.
Under Section 379, if Indian citizens or Indian companies hold not less than fifty per cent of a foreign company's paid up share capital, it must follow Chapter twenty two, as if it were incorporated in India. Section 380 lists the documents to deliver to the Registrar, Section 381 covers its accounts, and Section 92 on the annual return also applies.
Kenji: So Sakura must file its documents with the Registrar in India!
Exam tip! Two tests for a foreign company: incorporated outside India, and a place of business in India. And remember the fifty per cent rule under Section 379.
Let's recap. Section 2, clause 42. Incorporated outside India, with a place of business in India, even online. The place of incorporation decides. And Sections 379 to 382 apply.
Now try the test in the MPA app. In the next video, we will learn about companies limited by shares, limited by guarantee, and unlimited companies.