Foreign Companies

Section 379(2) is the provision an examiner reaches for. Where not less than fifty per cent of the paid-up share capital of a foreign company, whether equity or preference or partly each, is held by one or more citizens of India, or by one or more companies or bodies corporate incorporated in India, or by both together, whether singly or in the aggregate, that company shall comply with the provisions of this Chapter 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.

The mischief is straightforward and worth stating: without it, Indians could incorporate abroad, trade in India, and claim the light foreign-company regime while the substance of the enterprise was wholly Indian. The provision does not deem the company Indian for all purposes; it extends the Act's application to its Indian business, which is a narrower and more workable rule.

The obligations, section by section

Section 380: registration of documents. Within thirty days of establishing a place of business in India, the foreign company must deliver to the Registrar a certified copy of its charter, statutes, memorandum and articles or other constituting instrument, with a certified English translation if not in English; the full address of its registered or principal office; a list of its directors and secretary with prescribed particulars; the name and address of one or more persons resident in India authorised to accept service of process and notices on its behalf; the full address of its principal place of business in India; and the other prescribed particulars, including declarations about prosecutions and any prior place of business. Sub-section (3) requires any alteration in those particulars to be filed within the prescribed time, so the register stays current.

The service provision in clause (d) is the single most practically important line in the Chapter. It is what makes the foreign company suable in India without recourse to service abroad, and it pairs with section 383, which provides that any process, notice or document required to be served on a foreign company is deemed sufficiently served if addressed to the person whose name and address were delivered under s.380 and left at, or sent by post to, that address.

Section 381: accounts. Every foreign company must, in every calendar year, make out a balance sheet and profit and loss account in the prescribed form with prescribed particulars and annexures, and deliver a copy to the Registrar. A proviso lets the Central Government exempt a company or class of companies from the first requirement, or apply it with modifications. The section also requires delivery of documents relating to the accounts and, in the prescribed cases, a list of places of business established in India.

Section 382: display of name. The foreign company must conspicuously exhibit its name and the country of incorporation outside every office or place where it carries on business in India, in English and in the local language, state them in all business letters, billheads, notices and official publications, and, if the liability of its members is limited, give notice of that fact in those documents and outside its offices. The purpose is elementary and often missed in answers: a counterparty must be able to see, before contracting, that it is dealing with a foreign entity whose members are not personally liable.

Section 384: which Indian provisions are carried across. This is the section that makes the Chapter more than filings. Section 71 (debentures) applies mutatis mutandis. Sections 92 (annual return) and 135 (corporate social responsibility) apply subject to prescribed exceptions, modifications and adaptations. Section 128 (books of account) applies to the extent of requiring the company to keep at its principal place of business in India the books relating to monies received and spent, sales and purchases, and assets and liabilities of its Indian business. And the provisions on registration of charges, Chapter VI, apply to charges on property in India. An answer listing these four earns more than one that says "the Act applies with modifications".

Sections 385 and 386: fees and interpretation. Section 385 provides for fees on the registration of documents; s.386 defines expressions for the Chapter, including when a company is treated as having a place of business.

Raising money in India

Sections 387 to 389 govern a prospectus offering securities to the public in India by a company incorporated outside India: s.387 requires the prospectus to be dated and to contain the prescribed particulars, including the instrument constituting the company, the enactment under which it was incorporated and the address of its principal office in India; s.388 makes provision for experts' consent and allotment, requiring that the prospectus not include a statement purporting to be made by an expert without that expert's written consent; and s.389 requires registration of the prospectus with the Registrar before issue.

Section 390 empowers the Central Government to make rules for the offer of Indian Depository Receipts, the disclosures in the prospectus or letter of offer, the manner of dealing with them in a depository mode, and related matters. IDRs are the instrument by which a foreign company's shares are made available to Indian investors through a domestic depository, defined in s.2(48).

Section 391 is the enforcement bridge. Sub-section (1) applies sections 34 to 36, criminal and civil liability for misstatements in a prospectus and punishment for fraudulently inducing investment, to a prospectus issued by a foreign company under s.389 and to the issue of Indian Depository Receipts. Sub-section (2) applies Chapter XX, winding up, mutatis mutandis for the closure of the place of business of a foreign company in India, subject to s.376. So the protections a domestic investor has, worked in [Criminal Liability for the Prospectus] and [Civil Liability for the Prospectus], travel with the foreign issue, and an orderly exit is required when the Indian business closes.

Sections 392 and 393 close the Chapter. Section 392 punishes contravention: the foreign company with a fine not less than one lakh rupees, extending to three lakh rupees, with an additional daily fine up to fifty thousand rupees for a continuing offence, and every officer in default with the punishment the section prescribes.

Section 393 is the elegant one. A failure to comply with the Chapter does not affect the validity of any contract, dealing or transaction entered into by the company or its liability to be sued in respect thereof; but the company shall not be entitled to bring any suit, claim any set-off, make any counter-claim or institute any legal proceeding in respect of that contract until it has complied. Read the two halves together and the policy is exact: the transaction stands and the defaulter can still be sued, so the innocent Indian counterparty loses nothing, while the courthouse door is shut to the company in every form, claim, set-off and counterclaim alike, until it files what it should have filed.

Multinationals: where the Act reaches them

Papers set "legal regulations of Multinationals" as a note, and the first thing an answer must do is fix the vocabulary. Multinational is not a term of the Companies Act. No section defines it, none confers a status on it, and there is no separate code for it. A multinational enterprise reaches Indian company law in one of four capacities, and the regulation that applies is the regulation of that capacity.

As a foreign company. If it is incorporated outside India and has a place of business in India, physically or through electronic mode, it is a foreign company under s.2(42), and ss.380 to 386 and 392 and 393 apply: filing of the charter, directors and Indian representative within thirty days, annual accounts and place-of-business list, service on the Indian representative, display of name and country of incorporation, and the closed courthouse door in s.393.

As a foreign company that is Indian in substance. If not less than fifty per cent of its paid-up share capital is held by Indian citizens or Indian bodies corporate, or both, s.379(2) applies this Chapter and such other provisions as may be prescribed to its Indian business as if it were a company incorporated in India.

Through an Indian subsidiary. The commonest structure. The subsidiary is an Indian company and the whole Act applies to it directly, with the group provisions in [Holding, Subsidiary and Associate Companies] governing the relationship, the related party rules in [Related Party Transactions] governing dealings with the parent, and the consolidation and audit obligations following from the holding relationship. The parent's own liability for the subsidiary's acts is a question of the corporate veil, treated in [Lifting the Veil: the Judicial Doctrine] and [Lifting the Veil: the Statutory Grounds].

As an issuer to Indian investors. Where it raises money here, ss.387 to 391 apply, and by s.391(1) the misstatement liabilities in ss.34 to 36 travel with the issue; Indian Depository Receipts under s.390 are the instrument by which its shares reach Indian investors.

Two limits belong in the answer. The Companies Act is not the whole regulation of a multinational: exchange control, foreign direct investment policy, competition law, taxation and sectoral regulators all bear on it, and this book, whose boundary is the Companies Act, does not print provisions of those statutes it has not read in an official copy. And the exit is regulated too: by s.391(2) Chapter XX applies mutatis mutandis to the closure of the place of business of a foreign company in India, subject to s.376, and by s.376 a body corporate incorporated outside India that has ceased to carry on business in India may be wound up as an unregistered company even after it has been dissolved abroad, treated in [Winding Up Unregistered and Foreign Companies].

A worked example

Helvetia Instruments AG, incorporated in Switzerland, opens a technical support office in Pune on 1 April 2026 and begins selling equipment to Indian hospitals. Sixty per cent of its shares are held by an Indian listed company.

Is it a foreign company? Yes: incorporated outside India, with a place of business in India, s.2(42).

Which regime applies? Not only the baseline. Because not less than fifty per cent of its paid-up capital is held by a body corporate incorporated in India, s.379(2) requires it to comply with this Chapter and such other provisions of the Act as may be prescribed in respect of its Indian business, as if it were an Indian company.

What must it do by 1 May 2026? File under s.380: certified constitution with English translation, address of its principal office in Switzerland, list of directors and secretary, the name and address of a person resident in India authorised to accept service, and the address of its Pune office. Then annually: accounts under s.381, annual return under s.384(2) as modified; keep Indian books at Pune under s.384(3); display its name and country of incorporation at the Pune office and on its letterhead under s.382; register any charge it creates over its Indian property.

A dispute. In 2027 a hospital sues for defective equipment and serves the authorised person's Pune address. Service is good: s.383 deems service sufficient if addressed to a person whose name and address were delivered under s.380 and left at or posted to that address, or sent by electronic mode. Helvetia counterclaims for the unpaid price, and it emerges that it never filed anything under s.380. Section 393 supplies the answer with precision. The contract is valid and so is Helvetia's liability to be sued, so the hospital's claim proceeds and Helvetia cannot escape it by pleading its own default. But Helvetia may not bring a suit, claim a set-off, make a counterclaim or institute any proceeding on that contract until it has complied, so the counterclaim waits on the filings.

And a fundraising. If Helvetia offers securities to the Indian public, its prospectus must be dated and carry the prescribed particulars under s.387, be registered under s.389, and, by s.391(1), attract ss.34 to 36 exactly as an Indian issuer's prospectus would.

Distinctions

What it does NOT mean

Not incorporation in India. Filing under s.380 registers documents; it does not create an Indian company. A subsidiary incorporated here is an Indian company and outside this Chapter entirely.

Not immunity from other Indian law. Tax, foreign exchange, sectoral licensing and contract law all apply on their own terms; Chapter XXII is a company-law overlay.

Not that non-compliance voids contracts. Section 393 says the opposite in terms; the sanction is loss of the right to sue until compliance, plus penalties under s.392.

Quick revision

s.2(42): incorporated outside India, place of business in India by itself or an agent, physically or through electronic mode. s.379(1): ss.380 to 386, 392 and 393 apply to all foreign companies; s.379(2): fifty per cent or more Indian ownership means this Chapter and prescribed provisions apply to its Indian business as if it were an Indian company. s.380: file within thirty days, constitution with translation, addresses, directors and secretary, person resident in India authorised to accept service; alterations filed. s.381: annual balance sheet and profit and loss to the Registrar, exemptions by notification. s.382: display name and country, note limited liability. s.383: deemed service. s.384: s.71 mutatis mutandis; ss.92 and 135 with modifications; s.128 books at the Indian principal place; charge registration. ss.387 to 389: prospectus dated, particulars, expert's consent, registration. s.390: IDR rules. s.391: ss.34 to 36 applied; Chapter XX applied to closure of the Indian place of business. s.392: punishment. s.392: fine one to three lakh rupees, plus up to fifty thousand a day continuing. s.393: contracts and liability to be sued unaffected, but no suit, set-off, counterclaim or proceeding until compliance.

Test yourself

1. A company incorporated in Singapore sells software to Indian customers entirely online, with no office or staff here. Foreign company? Potentially yes: s.2(42) covers a place of business held through electronic mode, so the absence of premises is not decisive, and the prescribed rules determine which electronic modes count.

2. What is the consequence of fifty-one per cent Indian ownership of a foreign company? Section 379(2) requires it to comply with Chapter XXII and such other provisions as may be prescribed, in respect of its business in India, as if it were an Indian company; it is not deemed Indian for all purposes.

3. A foreign company that never filed under s.380 is sued in India and wishes to counterclaim. Advise. Under s.393 the contract and its liability to be sued are unaffected, so it must meet the claim; but it may not bring a suit, claim a set-off, make a counterclaim or institute any proceeding on that contract until it has complied. It also faces the s.392 penalty of one to three lakh rupees, with a daily fine for continuing default.

4. Which Indian sections does s.384 carry across to a foreign company? Section 71 on debentures, mutatis mutandis; sections 92 and 135 with prescribed exceptions and modifications; section 128 to the extent of keeping Indian books at the principal place of business in India; and the charge-registration provisions for property in India.

5. Does prospectus liability follow a foreign issuer? Yes: s.391(1) applies ss.34 to 36 to a prospectus issued by a company incorporated outside India under s.389 and to the issue of Indian Depository Receipts.

6. How does the Companies Act regulate a multinational? Not as a multinational, a term the Act does not use, but in whichever capacity it appears: as a foreign company under s.2(42) subject to ss.380 to 386 and 392 and 393; as a foreign company half owned by Indians and so subject to s.379(2) for its Indian business as if incorporated here; through an Indian subsidiary, to which the whole Act applies with the group and related-party provisions; and as an issuer under ss.387 to 391, with the misstatement liabilities in ss.34 to 36 carried across by s.391(1). Its exit is regulated by s.391(2), applying Chapter XX mutatis mutandis to the closure of its Indian place of business, and by s.376.