Chapter XXII - Companies Incorporated Outside India

Chapter orientation

What Chapter XXII actually regulates

Chapter XXII is the Companies Act gateway for an entity incorporated outside India that establishes a place of business in India and carries on business activity here. It creates two overlapping compliance tracks:

Operating-presence track

Sections 379-386 govern registration, documents, financial statements, display, service, debentures, CSR, books, charges and investigation.

Securities-offering track

Sections 387-393A govern prospectuses, expert consent, filing, Indian Depository Receipts, liability, penalties, legal disability and exemptions.

The chapter is entity-neutral but fact-sensitive: incorporation abroad is only the starting point. The decisive questions are Indian business nexus, activity, transaction type and the exact exemption or sectoral regime.

Threshold test

Section 2(42): when an overseas entity becomes a foreign company

"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.

Both limbs should be documented. A foreign incorporation alone is not enough; equally, a digital interface alone should not be treated mechanically without analysing the business activity and India-facing facts.

Test	Questions to ask	Evidence
Overseas incorporation	Is the entity a company or body corporate under foreign law?	Constitution, registry extract, good-standing evidence
Place of business	Office, branch, agent, project site, share-transfer office, digital or electronic mode?	Lease, agency agreement, URLs/apps, customer flows, infrastructure
Business activity	Are revenue, customers, fulfilment, advisory, transactions or service delivery connected with India?	Contracts, invoices, payment flows, support logs, user terms
Continuity	Is the India presence systematic or merely isolated?	Timeline, board papers, recurring activity, personnel
Exemption / special regime	Does an IFSC notification or another statute modify the result?	Notification, regulator approval, legal opinion

Do not use a single-factor rule: website accessibility, Indian customers, local server location, employee presence and a tax permanent establishment are relevant facts, but none should be treated as a universal substitute for the statutory two-limb analysis.

Electronic mode

Rule 2: digital presence can be a place of business

The Rules define business through electronic mode broadly. The listed activities include business-to-business and business-to-consumer transactions, data interchange, digital supply, web-based marketing, advisory and transactional services, database and online services, and financial settlements - whether or not the main server is installed in India and whether or not every transaction is completed electronically.

E-commerce platform

An overseas platform contracts with Indian sellers and buyers, controls the transaction flow and receives platform fees. Chapter XXII nexus should be assessed even without a leased office.

Remote SaaS provider

Indian access to software is not by itself the conclusion. Analyse contracting, targeted marketing, support, billing, fulfilment, data processing and systematic India business.

Securities in an IFSC

The 2021 explanation excludes specified electronic offer, subscription or listing of securities in an IFSC from the electronic-mode definition. The relief is narrow and transaction-specific.

Passive investment

Merely holding an Indian security does not automatically equal conducting business through an Indian place of business; the complete factual pattern still controls.

Board control: Overseas groups should maintain a Chapter XXII nexus memo before launching India-targeted digital products, not after the first MCA notice or contract dispute.

Entity architecture

Foreign company, subsidiary, branch and tax nexus are different concepts

Structure / concept	Legal identity	Chapter XXII position	Other key overlay
Indian subsidiary	Separate company incorporated in India	Generally governed as an Indian company, not a foreign company merely because its parent is overseas	FDI, beneficial ownership, transfer pricing, sector caps
Branch office	Same legal entity as overseas head office	Normally a foreign-company place of business; FC-1 and recurring compliance relevant	FEMA/RBI approval, tax PE, local registrations
Liaison office	Same legal entity; restricted liaison role	Chapter XXII registration may apply despite non-revenue nature	RBI conditions, no commercial income, annual activity certificate
Project office	Same entity for identified project	Registration and project-specific records may apply	FEMA project-office rules, contract tax, GST
Agent in India	Separate agent but may create statutory place of business	Fact-dependent; agency authority and conduct are important	Agency law, PE risk, GST and employment
Foreign portfolio investor	Overseas investor in Indian securities	Passive investment alone does not automatically create Chapter XXII status	SEBI/FPI, tax, custodian rules
Tax permanent establishment	Income-tax/treaty nexus	Not identical to Companies Act definition	Treaty, attribution and tax filings
IFSC issuer / listing	Capital-market activity in IFSC	Specific 2021 carve-out may apply to specified Chapter XXII provisions	IFSCA listing and issuance framework

Common error: Registering a branch with RBI does not complete MCA registration, and filing FC-1 does not substitute for FEMA approval.

Compliance lifecycle

From India entry to cessation

Stage	Action	Normal clock	Primary evidence
Before entry	Nexus, FEMA, sector, tax and structure memo	Before commitment	Board approval and legal analysis
Initial registration	File FC-1 with prescribed documents	Within 30 days of establishing place of business	Certified/apostilled records, service-agent details, approvals
Alteration	File FC-2	Within 30 days of change	Updated registry extract, board resolution, consent/address proof
Accounts	Prepare and audit India business accounts; file FC-3	Within 6 months of financial-year close; ROC extension up to 3 months may be sought	Financial statements, audit report, attachments
Annual return	File FC-4	Within 60 days from last day of financial year	Capital, members, directors, indebtedness and other prescribed data
Event filings	Charges, CSR, prospectus/IDR, investigation responses	Event-specific	CHG/CSR/offer documents
Cessation	Notify cessation and close open compliance	Promptly under prescribed form/process	Board resolution, closure evidence, final liabilities/tax plan

Section 379

379Application of Act to foreign companies

(1) Sections 380 to 386 and sections 392 and 393 apply to all foreign companies. (2) If at least 50% of the paid-up share capital of a foreign company is held, singly or in aggregate, by Indian citizens and/or Indian-incorporated companies or bodies corporate, the foreign company must comply with this Chapter and prescribed provisions for its Indian business as if it were incorporated in India.

Finin2min decoding: Sub-section (1) activates the core foreign-company regime. Sub-section (2) adds a stronger domestic-compliance overlay when Indian ownership reaches the statutory 50% threshold. The calculation covers equity and preference capital and aggregate direct holding described in the section.

Practical example: An overseas vehicle is 30% held by an Indian company and 22% by Indian citizens. The aggregate 52% holding triggers a Section 379(2) review for the business carried on in India.

Professional control: Maintain a cap-table certificate and beneficial-ownership bridge. Re-test the threshold after every issue, transfer, conversion, buy-back or preference-capital change.

Section 380

380Documents, etc., to be delivered to Registrar by foreign companies

Within 30 days of establishing a place of business in India, the foreign company must deliver prescribed documents to the Registrar, including its constitutional instrument, registered/principal office address, directors and secretary particulars, India-resident service representative, principal place of business in India and prescribed declarations/information. Alterations must also be filed within 30 days.

Finin2min decoding: FC-1 is an onboarding disclosure, not merely a registration number request. It identifies the foreign entity, its governance, Indian service address, place of business and regulatory permission status. FC-2 keeps that public record current.

Practical example: A UK company opens a Bengaluru branch on 1 July. Its FC-1 clock runs from the establishment date, not from the first invoice or bank-account opening.

Professional control: Create a certified-document matrix before establishment. Authentication, apostille/consularisation and English translation often take longer than the filing window.

Section 381

381Accounts of foreign company

Every foreign company must prepare prescribed balance-sheet and profit-and-loss documents for its Indian business for every year and deliver them to the Registrar. Documents must be in English or accompanied by a certified English translation. A list of every place of business in India must accompany the filing.

Finin2min decoding: Rule 4 converts the section into an India-business reporting pack: audited India financial statements plus the prescribed parent/consolidated, related-party, profit-repatriation and fund-transfer information. FC-3 is generally due within six months of the financial-year close, with a possible Registrar extension up to three months.

Practical example: A foreign branch closes its global accounts on 31 December. It must align the India reporting and filing timetable to the applicable Companies Act framework rather than assuming the parent-country filing date controls.

Professional control: Reconcile India ledgers to head-office books, tax returns, GST, bank remittances and transfer-pricing records before audit. Unexplained head-office allocations are a recurring qualification risk.

Section 382

382Display of name, etc., of foreign company

A foreign company must conspicuously display its name and country of incorporation outside every Indian office or place of business, in English and the local language. Business letters, billheads, letter paper, notices and official publications must state its name and country. Limited liability must also be disclosed as required.

Finin2min decoding: This is a public-identity rule. Customers and creditors must be able to see that they are dealing with an overseas legal person, its home jurisdiction and, where relevant, limited liability.

Practical example: A branch uses only the group brand on its premises and invoices, omitting the foreign legal name and country. That branding is not enough for Section 382.

Professional control: Add a legal-identity footer to websites, invoices, purchase orders, e-mail templates and customer contracts, and maintain local-language signage at every place of business.

Section 383

383Service on foreign company

Process, notice or document may be served on the foreign company by addressing it to the person whose details were filed under Section 380 and delivering, posting or electronically transmitting it to the filed address in the prescribed manner.

Finin2min decoding: The India-authorised person is a statutory service gateway. An outdated address can cause orders or notices to proceed even if head office did not internally route them.

Practical example: The authorised representative resigns, but FC-2 is not filed. A regulatory notice reaches the old registered service address and is not escalated.

Professional control: Use a central legal-notice mailbox, dual escalation, holiday backup and monthly test. File FC-2 before or immediately with any representative change.

Section 384

384Debentures, annual return, registration of charges, books of account and their inspection

Specified provisions including Section 71, Sections 92 and 135, Section 128, Chapter VI on charges and Chapter XIV on inspection, inquiry and investigation apply to foreign companies with prescribed adaptations for their Indian business.

Finin2min decoding: A foreign company is not outside mainstream governance merely because it is incorporated abroad. Depending on facts, it must maintain India books, file an annual return, register charges, comply with CSR and cooperate with investigations.

Practical example: A branch secures an Indian working-capital facility using India receivables. The charge-registration analysis applies in addition to the loan and FEMA documents.

Professional control: Maintain an applicability register for Section 71, FC-4, CSR thresholds, Section 128 books, CHG forms and investigation response ownership.

Section 385

385Fee for registration of documents

Documents required under this Chapter must be delivered with the prescribed fees.

Finin2min decoding: A filing is not complete merely because the document was uploaded. Fee, additional fee, form status, resubmission and approval must all be tracked.

Practical example: FC-2 is uploaded before the deadline but payment fails. The team treats the upload timestamp as completion and discovers the form is not filed.

Professional control: Retain challan, service request number, approval e-mail and MCA master-data check in the statutory filing file.

Section 386

386Interpretation

For this Chapter, "certified" has the prescribed meaning; "director" includes a person occupying the position of director by whatever name called; and "place of business" includes a share-transfer or share-registration office.

Finin2min decoding: Labels do not defeat substance. A governing person may be a director even under another title, and a share-registration office can independently create a place-of-business connection.

Practical example: An overseas body calls its governing members "council managers". If they perform director functions, the Chapter's director disclosures cannot be avoided by nomenclature.

Professional control: Map foreign-law roles to Indian functional concepts and obtain local counsel certification where the home-jurisdiction structure is unusual.

Section 387

387Dating of prospectus and particulars to be contained therein

A prospectus issued in India for securities of a company incorporated outside India must be dated, signed and contain prescribed constitutional, incorporation, inspection, India-office and Section 26-type information. Application forms generally must be accompanied by a compliant prospectus, subject to statutory exemptions.

Finin2min decoding: The section imposes India-facing disclosure standards on a foreign issuer. Home-market disclosure or listing status does not automatically satisfy the Indian prospectus requirements.

Practical example: A foreign issuer circulates a global offering memorandum to Indian retail investors without India-specific statutory particulars or filing.

Professional control: Classify the offering, investor group, distribution channel and jurisdiction before circulation. Restrict access until Indian counsel confirms the document route and exemptions.

Section 388

388Provisions as to expert consent and allotment

A foreign-company prospectus may not include an expert statement without written consent that has not been withdrawn, and must state that consent. Prescribed provisions on application and allotment apply. Material incorporated by reference is treated as part of the prospectus.

Finin2min decoding: Valuation, engineering, geological, legal or accounting expert material carries consent and liability consequences. Hyperlinks and referenced reports cannot be treated as outside the prospectus risk perimeter.

Practical example: An offering document quotes a valuation report but the valuer consented only to private lender use, not public distribution.

Professional control: Maintain an expert-consent register showing exact text, report version, permitted use, continuing consent and withdrawal cut-off.

Section 389

389Registration of prospectus

Before issue, circulation or distribution in India, a certified copy of the prospectus, approved by board resolution and signed by the chairperson and two directors, must be delivered to the Registrar. The prospectus must state that it has been filed and prescribed consents/documents must accompany it.

Finin2min decoding: Registration is a pre-distribution control. Filing after the document has entered the market does not cure the initial breach.

Practical example: The marketing team posts the offer document online for Indian investors one day before the board-approved copy is filed.

Professional control: Use a release checklist that locks website publication, e-mails, roadshow materials and application links until board approval, signatures, filing acceptance and expert consents are confirmed.

Section 390

390Offer of Indian Depository Receipts

The Central Government may prescribe rules for an outside-India company offering Indian Depository Receipts, including disclosures, depository and custodian arrangements, intermediaries and sale, transfer or transmission, whether or not the company has an Indian place of business.

Finin2min decoding: IDR regulation can apply even without an operating-place nexus. Rule 13 works with the current SEBI and RBI framework; historical rule cross-references must be read with the regulations presently in force.

Practical example: A foreign listed company plans rupee-denominated depository receipts for Indian investors but assumes Chapter XXII does not apply because it has no Indian branch.

Professional control: Build an integrated MCA-SEBI-RBI-depository-custodian workstream. Confirm current eligibility, draft-document review, due diligence, financial reporting and continuing obligations.

Section 391

391Application of sections 34 to 36 and Chapter XX

Sections 34 to 36 apply to foreign-company prospectuses under Section 389 and to IDR offer documents. Subject to Section 376, Chapter XX winding-up provisions apply, with necessary adaptations, to closure of the Indian place of business where money raised under this Chapter remains unpaid or unredeemed.

Finin2min decoding: Civil and criminal prospectus liability travels with the offer. Closing the Indian office is not a mechanism to escape repayment or redemption obligations to Indian security holders.

Practical example: A foreign issuer closes its India representative office while outstanding IDRs remain unredeemed.

Professional control: Maintain post-offer liability ownership and an exit-condition checklist covering security-holder payments, registrar/custodian records, claims and India process service.

Section 392

392Punishment for contravention

A foreign company that contravenes this Chapter is punishable with a fine of at least Rs. 1 lakh and up to Rs. 3 lakh, plus up to Rs. 50,000 for every day of continuing contravention. Every officer in default is punishable with a fine of at least Rs. 25,000 and up to Rs. 5 lakh.

Finin2min decoding: The current provision uses monetary punishment for the company and officers. Continuing defaults can compound rapidly, and separate liability under prospectus, fraud, FEMA, tax or sectoral law may also arise.

Practical example: An FC-4 default continues for 90 days after detection. The continuing-fine exposure is additional to the base contravention and remediation cost.

Professional control: Escalate missed filing clocks immediately. Record default start, corrective filing, adjudication strategy, officer responsibility and evidence of controls strengthened.

Section 393

393Company's failure to comply not to affect validity of contracts, etc.

Non-compliance with this Chapter does not invalidate the foreign company's contracts or prevent it from being sued. However, the company cannot bring a suit, claim a set-off, make a counterclaim or institute legal proceedings relating to a contract, dealing or transaction until it has complied with the applicable Chapter requirements.

Finin2min decoding: Section 393 is commercially severe: customer and creditor claims remain enforceable against the foreign company, while its own enforcement rights can be blocked until compliance is cured.

Practical example: A foreign supplier sues an Indian customer for unpaid invoices. The customer establishes that the supplier carried on India business without Chapter XXII compliance.

Professional control: Before litigation, arbitration invocation or debt recovery, run a foreign-company compliance certificate. Cure filings first and preserve proof that the disability has ended.

Section 393A

393AExemptions under this Chapter

The Central Government may, by notification, exempt a class of foreign companies or companies incorporated outside India - whether or not they have a place of business in India - from any provision of this Chapter, subject to conditions. Notifications must be laid before Parliament.

Finin2min decoding: Exemptions are notification-based and must be read narrowly. The 2021 IFSC notification gives targeted relief for specified securities offering, prospectus and incidental matters; it is not a general waiver of registration, accounts or other obligations unrelated to that transaction.

Practical example: An issuer listed in an IFSC assumes the exemption also removes its FC-3 obligations for a separate Indian branch. That conclusion overextends the notification.

Professional control: Maintain an exemption opinion quoting the exact notification, entity class, transaction, conditions, effective date and provisions relieved. Re-test when facts change.

Rules architecture

Companies (Registration of Foreign Companies) Rules, 2014 - Rule 1 to Rule 13

Rule	Subject	High-use control
1	Title and commencement	Rules effective from 1 April 2014; use consolidated amendments
2	Definitions	Electronic mode, depository, IDR, custodian; 2021 IFSC explanation
3	Particulars relating to directors and secretary	FC-1 initial filing; FC-2 alterations; CRC routing from 9 September 2024
4	Financial statements	Schedule III-based India accounts and prescribed attachments; six-month filing
5	Audit of accounts	Practising Indian CA/firm/LLP; Chapter X adaptations
6	List of places of business	FC-3 attachment and complete India location register
7	Annual return	FC-4 within 60 days from financial-year end
8	Office where documents delivered	Registrar jurisdiction; FC-1 to Central Registration Centre
9	Certification	Authentication path for Commonwealth, Hague and other jurisdictions
10	Translation	English translation and certification requirements
11	Documents annexed to prospectus	Expert consent, contracts, underwriting agreement, POA
12	Action for improper use / description	Investigation route under Section 210
13	Indian Depository Receipts	Eligibility, approvals, disclosures, intermediaries and continuing framework

Form controls change faster than section text. Before filing, verify the current MCA V3 utility, attachment size, digital-signature role, certification requirement, fees and resubmission logic.

Initial registration

FC-1 professional filing pack

Document / data	Why required	Failure point
Charter, statute, memorandum/articles or constituting instrument	Proves legal existence, objects and governance	Wrong version, incomplete amendments, uncertified copy
Registered/principal office abroad	Official foreign address	Mismatch with registry extract
Directors and secretary particulars	Public governance disclosure	Foreign titles not mapped; identity/address inconsistency
India authorised person for service	Statutory notice gateway	No resident availability, weak consent or outdated address
Principal place of business in India	Defines India operating location	Using consultant address without factual basis
RBI / other regulator approval or declaration	Confirms sector-entry position	Assuming MCA filing creates approval
Prior India office opening/closure details	Historical transparency	Undisclosed earlier project/branch
No-conviction / debarment declaration	Integrity control	No cross-border diligence or incomplete scope
Translation and authentication	Makes foreign records usable in India	Apostille/consular chain defective
Board authority and DSC	Valid execution	Signatory not properly authorised

CRC change from 2024

From 9 September 2024, the initial FC-1 filing is routed to the Registrar, Central Registration Centre. Ongoing jurisdiction and other Chapter filings still require careful use of the current MCA form architecture.

Thirty-day clock

The clock runs from establishment of the place of business. Internal readiness, bank opening or commercial launch should not be substituted for the legal trigger date.

Current filing authority: the 2024 amendment routes initial FC-1 to the Registrar, Central Registration Centre from 9 September 2024. It does not automatically centralise every later foreign-company filing or enforcement matter.

Cross-border documents

Certification, apostille and translation controls

The Rules prescribe different authentication pathways depending on the home jurisdiction and treaty status. A professional filing file should record why the chosen route is valid.

Situation	Typical route	Control
Commonwealth jurisdiction	Certification in prescribed manner by competent official/notary	Check authority and seal against current rules
Hague Apostille Convention jurisdiction	Notarisation and apostille as applicable	Apostille must relate to the correct original/copy/signature
Other jurisdiction	Consular/diplomatic authentication route	Allow lead time and verify mission requirements
Document not in English	Certified English translation	Translator identity, source document and completeness
Electronic registry extract	Assess whether certified electronic record satisfies Rule 9	Do not assume downloaded PDF is certified

Evidence file: retain the original-language document, certified copy, authentication/apostille, translation certificate, English translation and a version-control index.

Annual financial reporting

Rule 4, Rule 5 and FC-3

The reporting objective is to make the Indian business auditable without losing the link to the foreign enterprise. The pack should reconcile local books with the head-office and consolidated accounts.

Component	Core requirement	Professional test
India balance sheet and profit and loss	Prepared for India business under prescribed framework	Schedule III mapping and India-only cut-off
Audit	Indian practising CA/firm/LLP	Engagement scope covers all India places and head-office allocations
Parent consolidated financial statements	Latest available as prescribed	Correct period, translation and authentication
Related-party transactions	Prescribed India business statement	Matches transfer-pricing file and ledger
Profit repatriation	Statement of profits sent abroad	Matches bank/FEMA/tax records
Funds received / remitted	Statement of transfers between India and related entities	Classify capital, loan, reimbursement, fee and settlement correctly
List of places of business	Complete India footprint	Reconcile to GST, Shops Act, leases and websites
Filing	FC-3 within six months; possible extension up to three months	Extension sought before relying on it; approval retained

Accounting boundary risk: A branch cannot simply attach the parent financial statements. India assets, liabilities, income, expenses, related parties, remittances and allocations must be separately identified and audited.

Annual return

FC-4 and corporate-data integrity

Rule 7 requires the foreign company to file its annual return in FC-4 within 60 days from the last day of its financial year. The return should agree with FC-1/FC-2, FC-3, charge records and current foreign registry information.

Reconciliation	Documents to compare	Red flag
Governance	FC-4 vs current directors/secretary registry	Director left but FC-2 missing
India offices	FC-4 vs FC-3, GST and leases	Undisclosed sales/support location
Capital / ownership	FC-4 vs foreign registry and parent accounts	Indian holding crosses Section 379(2) threshold
Indebtedness and charges	FC-4 vs CHG filings and bank confirmations	Security created but not registered
Authorised representative	FC-4 vs service-agent consent and address	Notices still routed to former employee
Financial data	FC-4 vs FC-3 audited accounts	Different reporting period or currency translation

Close calendar: Schedule FC-4 after FC-3 data is substantially final, while preserving enough time to correct FC-2 and charge-record discrepancies.

CSR overlay

Section 135 as applied through Section 384

A foreign company that meets the Section 135 thresholds can be subject to CSR for its Indian business. The CSR Rules adapt governance concepts for foreign companies, including the authorised person under Section 380.

Applicability

Test net worth, turnover and net profit using the applicable statutory basis for the foreign company and its Indian business.

Governance

Document the role of the authorised India person and other persons required under the Rules; do not assume the overseas board process alone is enough.

Spending and transfer

Track eligible projects, administrative overhead, impact-assessment rules, unspent amounts and statutory transfers separately.

Reporting

Align Board/annual CSR reporting, financial statements and CSR-2 requirements with the foreign-company filing calendar.

Example: A profitable India branch crosses the prescribed net-profit threshold. It should run a CSR applicability and spending computation even though the foreign parent is not an Indian company.

Security and finance

Charges, debentures and India books

Area	Companies Act overlay	Execution control
Debentures	Section 71 applies with prescribed adaptations	Instrument, trustee, security, redemption and offer route
Charges	Chapter VI applies to property situated in India and relevant Indian business assets	CHG filing, modification, satisfaction and register reconciliation
Books	Section 128 applies to India business books at principal place in India	ERP access, vouchers, retention and branch/head-office reconciliation
Inspection/investigation	Chapter XIV applies to India business	Data preservation, local representative and cross-border privilege strategy
Borrowing remittances	Separate FEMA and tax analysis	ECB, branch borrowing, interest, withholding and transfer pricing

Charge trap: A security document may be valid between lender and borrower yet still require Companies Act registration. Conversely, a CHG filing does not cure an impermissible FEMA borrowing or security.

Public identity and legal process

Sections 382-383 operating checklist

Physical locations

Full legal name
Country of incorporation
English and local language
Limited-liability disclosure where applicable

Communications

Invoices and quotations
Purchase orders and contracts
Letterhead and notices
Website, app and e-mail footer

Service controls

Resident authorised person
Current filed address
Central notice inbox
Backup and escalation matrix

Change controls

FC-2 within 30 days
Update signage and templates
Notify banks/regulators
Preserve proof of change

Capital-market route

Prospectus, IDR and liability framework

1. Classify offer
Public / private, India distribution, investor type, IFSC or mainland

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2. Build disclosures
Sections 387-388, current securities rules and home-market materials

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3. Consents
Experts, underwriters, contracts, authority and signatures

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4. File before release
Section 389 and prescribed filing process

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5. Continue compliance
Allotment, depository, reporting, redemption and liability

Risk	Why material	Control
Indian digital distribution	Offer may be treated as circulated in India	Geo/access control and legal classification
Global document reused in India	May omit Indian statutory particulars	India wrapper or compliant document
Expert report	Consent and liability may be absent	Exact-form written consent
Board approval / signatures	Section 389 formalities are preconditions	Locked final document and certified board resolution
IDR regulation	MCA rule, SEBI, RBI and depository layers interact	Single integrated closing checklist
Post-office closure	Outstanding Indian investor obligations survive	Redemption and claims plan

Indian Depository Receipts

Rule 13 decoded

Rule 13 establishes the company-law mechanics for an outside-India issuer accessing Indian investors through IDRs, in addition to current SEBI and RBI requirements. The rule contains financial and market-track-record eligibility concepts, draft-document review, due diligence and disclosure requirements.

Workstream	Key questions
Eligibility	Capital/free reserves, market capitalisation, home-exchange trading history, profit history and current SEBI conditions
Regulatory approvals	SEBI review, RBI directions, stock exchange and depository/custodian acceptance
Structure	Underlying shares, overseas custodian bank, domestic depository and IDR ratio
Draft document	Timing, due-diligence certificate, financial information, risk factors and legal proceedings
Distribution	Investor class, application process, allotment and refund
Continuing obligations	Listing, disclosure, voting/beneficial rights, corporate actions, conversion and redemption

Current-law control: Rule 13 contains historical regulation references. Use the Companies Act rule together with the current SEBI ICDR, listing and RBI/IFSCA framework effective on the transaction date.

IFSC overlay

Section 393A and the 2021 targeted exemption

The 5 August 2021 notification exempts the specified class of companies incorporated outside India from Sections 387-392 to the extent those provisions concern offering of securities, prospectus and incidental matters in an International Financial Services Centre. The associated Rule 2 explanation also removes specified IFSC offer/subscription/listing activity from the electronic-mode definition.

Question	Correct approach
Does IFSC listing remove all Chapter XXII duties?	No. Read the exact exempted sections and transaction scope.
Does it automatically exempt a separate Indian branch?	No. The branch and its accounts/filings require independent analysis.
Are IFSCA rules optional after MCA exemption?	No. The transaction moves under the applicable IFSC regulatory framework.
Does any electronic India activity become exempt?	No. The explanation is limited to specified IFSC securities activity.
Can the exemption be assumed forever?	No. Verify current notification, conditions, issuer class and amendments.

Drafting rule: Never state "IFSC companies are exempt from Chapter XXII." State the exact entity class, transaction and provisions covered by the notification.

Cessation and closure

Closing an Indian place of business without leaving liabilities behind

Cessation is both a filing event and a commercial close-out. The company should not file closure while leaving unallocated employees, contracts, taxes, security interests, litigation, investor claims or records.

Close-out stream	Required work
Corporate filing	Board approval, FC-2/cessation filing, final public-record check
FEMA / banking	RBI/AD-bank closure, remittances, bank accounts and asset disposal
Tax	Final returns, assessments, withholding, PE exit and tax-clearance strategy
GST / local	Cancel or amend GST, Shops Act, professional tax and sector registrations
Employees	Termination/transfer, wages, gratuity, PF/ESI and records
Contracts	Novation, termination, claims, warranties and data obligations
Charges / assets	Satisfaction/release, disposal, title and custody
Litigation / service	Continuing representative and funding for pending claims
Records	Statutory, tax, employment, customer and investigation preservation
Securities	Repayment/redemption and Section 391 implications where applicable

Closing the office ends the operating footprint; it does not rewrite history, invalidate contracts or extinguish accrued liabilities.

Default and enforcement

Sections 392-393: why late registration can block recovery

Monetary exposure

Base fine for the company plus a continuing-day fine; separate officer-in-default exposure.

Commercial disability

Contracts remain valid against the company, but its own suit, set-off, counterclaim or proceeding can be blocked until compliance.

Prospectus exposure

Sections 34-36 apply to foreign-company prospectuses and IDR offer documents.

Investigation

Improper use or description and Indian-business conduct can trigger inquiry/investigation powers.

Litigation readiness example: Before filing a Rs. 8 crore recovery claim, counsel discovers the supplier had an India electronic-business nexus but never filed FC-1. A cure plan and evidence of compliance should be completed before depending on the claim.

Current section 392 band: foreign company fine Rs. 1 lakh-Rs. 3 lakh plus up to Rs. 50,000 for each continuing day after the first; officer in default fine Rs. 25,000-Rs. 5 lakh. Section 393 preserves contract validity but restricts enforcement by the non-compliant foreign company until compliance.

Practical casebook

Twelve decision cases

Case 1 - Overseas SaaS with Indian clients

No office, India-targeted sales team abroad, recurring Indian contracts, local payment gateway and support.

Answer: Run the two-limb Section 2(42) and electronic-mode test; do not conclude solely from server location.

Case 2 - Indian subsidiary

100% foreign-owned Indian private company.

Answer: It is an Indian company. Chapter XXII applies to the foreign parent only if the parent separately meets the foreign-company nexus.

Case 3 - Liaison office

RBI-approved liaison office says it earns no India revenue.

Answer: No-revenue status does not eliminate Chapter XXII registration, accounts, display and return analysis.

Case 4 - Director change abroad

Home registry records a new director; India filing team learns two months later.

Answer: FC-2 alteration clock and remedial action must be assessed; build automated foreign-registry change alerts.

Case 5 - Indian ownership reaches 50%

Indian investors acquire 51% of paid-up capital of the foreign company.

Answer: Section 379(2) overlay must be assessed for the Indian business from the relevant change.

Case 6 - Unregistered charge

Indian branch gives security over Indian receivables.

Answer: Chapter VI filing and FEMA/financing legality are separate mandatory analyses.

Case 7 - Global prospectus e-mailed into India

No India wrapper or pre-filing.

Answer: Sections 387-389 and securities-law distribution restrictions require immediate review.

Case 8 - IFSC listing plus mainland branch

Issuer relies on 2021 exemption for everything.

Answer: Use relief only for its notified IFSC securities scope; mainland branch filings remain separate.

Case 9 - Contract suit while non-compliant

Customer defaults; foreign supplier seeks injunction and recovery.

Answer: Section 393 may bar the supplier's proceeding until compliance, although customer claims remain valid.

Case 10 - Cessation with pending tax appeal

Office closed, but tax dispute continues.

Answer: Preserve service representation, records, funding and litigation authority after physical closure.

Case 11 - Branch accounts use parent numbers

No India allocation working or related-party statement.

Answer: Rule 4 and audit requirements need India-specific statements and reconciliation.

Case 12 - Share registration desk

No sales office, only India share-transfer support.

Answer: Section 386 includes a share-transfer/share-registration office in place of business.

Professional controls

Implementation checklists

Entry checklist

Legal-entity and nexus memo
FEMA/RBI and sector approvals
Board authority
Certified/apostilled documents
Service-agent consent
India address and signage
FC-1 within 30 days

Monthly change checklist

Foreign directors/secretary
Constitution and registered office
India locations
Authorised representative
Ownership and Section 379(2)
Charges and borrowings
FC-2 trigger log

Year-end checklist

India trial balance
Head-office allocations
Related parties
Funds and profit remittances
Indian audit
FC-3 and places list
FC-4 reconciliation
CSR and charges

Offer checklist

India/IFSC classification
SEBI/RBI/IFSCA route
Prospectus particulars
Expert consent
Contracts and underwriting
Board approval/signatures
Pre-release filing
Post-offer obligations

Deadlines and forms

High-use compliance matrix

Requirement	Form / record	Normal timeline	Section / Rule
Initial foreign-company registration	FC-1	Within 30 days of establishing place of business	Section 380 / Rule 3
Alteration of registered particulars	FC-2	Within 30 days of alteration	Section 380(3) / Rule 3
India financial statements and places list	FC-3	Within 6 months of financial-year close; possible extension up to 3 months	Section 381 / Rules 4 and 6
Annual return	FC-4	Within 60 days from last day of financial year	Section 384 / Rule 7
Charge creation / modification / satisfaction	Applicable CHG form	Event-specific Chapter VI timeline	Section 384
CSR reporting	CSR records / applicable filing	Applicable Section 135 and CSR Rules timeline	Section 384
Prospectus filing	Prescribed Registrar filing pack	Before issue, circulation or distribution in India	Section 389 / Rule 11
Cessation / relevant alteration	FC-2 / current process	Promptly within alteration framework	Rule 8 and form instructions

Calendar rule: Use legal trigger dates, not internal awareness dates. A delayed internal notification does not restart the statutory clock.

Finin2min Q&A

Twenty rapid answers

Q1. Is every foreign-owned company a foreign company?

No. A company incorporated in India remains an Indian company even if wholly foreign-owned.

Q2. Can a foreign company exist without a physical Indian office?

Yes. The definition expressly includes a place of business through electronic mode, subject to the complete two-limb test.

Q3. Does one Indian customer automatically trigger FC-1?

Not automatically. Analyse place of business and business activity together, including continuity and commercial facts.

Q4. Is FC-1 filed after the first invoice?

No. The statutory clock relates to establishment of the place of business.

Q5. Where is FC-1 processed now?

The 2024 amendment routes FC-1 to the Registrar, Central Registration Centre.

Q6. Are foreign documents always accepted in English scans?

No. Certification, apostille/consular authentication and translation rules must be satisfied.

Q7. Does RBI branch approval replace FC-1?

No. FEMA approval and Companies Act registration are separate.

Q8. Is FC-2 only for address changes?

No. It covers prescribed alterations in constitutional, governance, service-agent and place-of-business particulars.

Q9. Can parent consolidated accounts replace FC-3?

No. India-business accounts and prescribed statements are required.

Q10. Who audits the India accounts?

A practising chartered accountant, firm or LLP in India as prescribed.

Q11. Can a foreign company be subject to CSR?

Yes, where Section 135 applies through Section 384 and the CSR Rules.

Q12. Do charge-registration rules apply to a branch?

They can apply through Section 384; the secured asset and transaction must be examined.

Q13. Is the annual return due with accounts?

They are separate filings: FC-3 follows the accounts timeline and FC-4 is due within 60 days from financial-year end.

Q14. Can a global prospectus simply be used in India?

Not safely without analysing Sections 387-389 and current securities law.

Q15. Does an IDR issuer need an Indian branch?

No. Section 390 can apply whether or not the issuer has a place of business in India.

Q16. Is every IFSC issuer exempt from Chapter XXII?

No. The 2021 relief is limited to the notified class, provisions and securities activity.

Q17. What is the current Section 392 consequence?

Monetary punishment for the company and officers, including a continuing-day component for the company.

Q18. Does non-compliance void customer contracts?

No. Contracts remain valid and the company can still be sued.

Q19. Can the non-compliant foreign company sue?

Section 393 can bar its suit, set-off, counterclaim or proceeding until compliance.

Q20. Does closing the India office erase liabilities?

No. Tax, employee, contract, investor, regulatory and litigation obligations must be closed or maintained lawfully.

Final revision

One-page memory framework

OPERATING PRESENCE

379 application and Indian ownership
380 FC-1 / FC-2
381 India accounts / FC-3
382 display
383 service
384 annual return, CSR, books, charges, investigation
385-386 fee and interpretation

SECURITIES AND ENFORCEMENT

387 prospectus particulars
388 expert consent / allotment
389 pre-issue registration
390 IDR
391 prospectus liability / closure
392 fines
393 contract valid, suit blocked
393A notified exemption

Sources and legal-update register

Primary materials used

Companies Act, 2013: India Code consolidated Act, Section 2(42) and Chapter XXII, Sections 379-393A.

Rules: Companies (Registration of Foreign Companies) Rules, 2014, including G.S.R. 538(E) dated 5 August 2021, G.S.R. 36(E) dated 20 January 2023 and G.S.R. 491(E) dated 12 August 2024 effective 9 September 2024.

IFSC: Central Government notification under Section 393A dated 5 August 2021 and the applicable IFSCA listing/issuance framework.

Securities: Current SEBI Issue of Capital and Disclosure Requirements framework, listing requirements and RBI directions applicable to IDRs and foreign issuers.

Cross-border operation: FEMA/RBI branch, liaison and project office requirements; tax, GST, employment, sector and local-establishment law must be separately checked.

Update control: MCA V3 forms, filing fees, attachment requirements, SEBI/IFSCA regulations, RBI directions and exemption notifications should be rechecked on the actual transaction or filing date.

Educational and professional-reference use: This chapter is not a substitute for a transaction-specific legal, tax, FEMA, securities, accounting or sectoral opinion.