Foreign Companies – Procedures for Opening Branches in India Under Companies Act and FEMA
Posted in International Financing on February 24th, 2008 by davidguide – Comments OffCompanies Incorporated Outside India:
Right from days of East India Company foreign companies were incorporating companies in India. After the liberalization policy Indian companies also started incorporating subsidiaries outside India. Recently many foreign companies have shown interest to open branch office or liaison office to monitor their business in India. In case they opt to incorporate a subsidiary company in India they have to follow the procedures given under the Companies Act, and also the provisions of the act will apply in to after the company is incorporated. If a company incorporated outside India wish to have a place of establishment in India without incorporating separate company for various reasons then it has to follow the procedures laid down in Part XI-sections 591 to 602.
The Act, which has been enacted to oversee the functioning of companies in India, draws heavily from the United Kingdom’s Companies Acts and although similar, is more comprehensive. The Registrar of Companies (ROC) and the Company Law Board (CLB), both working under the Department of Company Affairs, ensure compliance with the Act. Sections 592 to 602 of the Companies Act of India closely follows sections 406 to 423 of the English Act barring sections 408, 416 to 418 of the act.
Foreign Companies:
A foreign company is a company which is incorporated in a country outside India under the law of that other country and has a place of business in India. Sections 591 to 602 of the Act deal with such companies.
Foreign Companies are of two classes namely:
Companies incorporated outside India, which have established a place of business in India after April 1, 1956; and Companies incorporated outside India, which have established a place of business in India before that date and continue to have an established place of business in India.
Part XI of the Companies Act, 1956 containing Section 591 to 608 deals with the Companies incorporated outside India i.e. a “Foreign Company.” The provisions of this part of the Companies Act, 1956 prescribes that its Sections 592 to 602 shall be applicable to Companies who are incorporated outside India which after the commencement of the Companies Act, 1956 establishes a place of business within India and Companies incorporated outside India having established place of business within India prior to the commencement of the Companies Act, 1956 and continue to have the said establishment. It says that a Company incorporated outside India and having an established place of business in India in which 50% or more paid up share capital is held by Indians then provisions of those sections shall apply to such Companies also. read more »