Companies Incorporated Outside India

(a)(i) According to section 379(2) of the Companies Act, 2013,

Where not less than 50% of the paid-up share capital, whether equity or preference or partly equity and partly preference, of a foreign company incorporated outside India is held by:

(1)one or more citizens of India; or

(2)by one or more companies or bodies corporate incorporated in India; or

(3)by one or more citizens of India and one or more companies or bodies corporate incorporated in India,

whether singly or in the aggregate, such foreign company shall also comply with the provisions of Chapter XXII 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.

In the given question, 40% of paid-up share capital of ADR Tech Ltd. is held by Indian citizens and 15% is held by an Indian incorporated company. Thus, total 55% of share capital is held by Indian citizens and an Indian company.

Therefore, section 379(2) is applicable to ADR Tech Ltd.

Thus, ADR Tech Ltd., being a foreign company having a place of business in India, shall comply with the provisions of Chapter XXII of the Companies Act, 2013 and such other provisions of the Act as may be prescribed, in respect of its business carried on in India, as if it were a company incorporated in India.

(ii)As per section 380(1), a foreign company having a place of business in India is required to deliver the prescribed documents to the Registrar within 30 days of establishment of its place of business in India.

Source⁠​‌​‌‌​‌​⁠: ICAI Suggested Answers, September 2026, 5(a) (New Scheme).

(b)(i) According to section 381 of the Companies Act, 2013 read with Rule 4 of the Companies (Registration of Foreign Companies) Rules, 2014,

Every foreign company shall, in every calendar year,

(a)make out a balance sheet and profit and loss account in such form, containing such particulars and including or having annexed or attached thereto such documents as may be prescribed; and

(b)deliver a copy of those documents to the Registrar:

Every foreign company shall, along with the financial statement required to be filed with the Registrar, attach thereto the following documents; namely:-

(1)Statement of related party transaction

(2)Statement of repatriation of profits

(3)Statement of transfer of funds (including dividends, if any)

The above statements shall include such other particulars as are prescribed in the Companies (Registration of Foreign Companies) Rules, 2014.

The documents referred to in this rule shall be delivered to the Registrar within a period of six months of the close of the financial year of the foreign company to which the documents relate:

Provided that the Registrar may, for any special reason, and on application made in writing by the foreign company concerned, extend the said period by a period not exceeding three months.

In the instant case, the claim of Global Trade LLC on non-attachment of documents usually attached with the financial statements with the Registrar under the pretext that there were no transactions of that nature is not valid; the company should have filed “Nil” statements in the prescribed documents. Also, the filing of said documents after 10 months from the close of the financial year is not in compliance.

(ii)As per section 393, any failure by a company to comply with the provisions of Chapter XXII of the Companies Act, 2013, shall not affect the validity of any contract, dealing or transaction entered into by the company or its liability to be sued in respect thereof.

However, 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 any such contract, dealing or transaction, until the company has complied with the provisions of the Companies Act, 2013, applicable to it.

Therefore, the claim of the company is not correct that it shall not be affected in any way, nor it shall affect the contracts entered by it. Even though the contract itself will not be affected, the company shall not be entitled to bring any suit, claim any set-off, make any counterclaim or institute any legal proceeding in respect of such contract, dealing or transaction, until the company has complied with the above stated provisions.

Source⁠​‌​‌‌​‌​⁠: ICAI Suggested Answers, May 2026, 6(b) (New Scheme).

(a)(1) Under section 381 of the Companies Act, 2013 read with Rule 4 of the Companies (Registration Offices and Fees) Rules, 2014, every foreign company, shall along with the financial statement which it is required to file with the Registrar, attach thereto the following documents; namely:

(i)Statement of related party transactions

(ii)Statement of repatriation of profits

(iii)Statement of transfer of funds (including dividends, if any)

The above statements shall include such other particulars as are prescribed in the Companies (Registration of Foreign Companies) Rules, 2014 .

(2)All these documents shall be delivered to the Registrar within a period of 6 months from the close of the financial year of the foreign company to which the documents relate.

Provided that the Registrar may, for any special reason, and on application made in writing by the foreign company concerned, extend the said period by a period not exceeding three months.

Since, Zen Tech Ltd.’s financial year ends on 31 March 2025, it must file the documents by 30 September 2025 and if it applies for extension and if approved, the new due date may be extended upto 31 December 2025.

Source⁠​‌​‌‌​‌​⁠: ICAI Suggested Answers, January 2026, 5(a) (New Scheme).

(a)As per the facts given in the question, we have to answer whether Chicago Bricks Inc. (advised through its Director Mr. Ramesh) is correct as to applicability of formation of the CSR Committee or as to nonapplicability of formation of the CSR Committee (by the Indian branch) is correct.

The question can be answered by analysing the provisions of section 135(1), 135(5) and 135(9) of the Companies Act, 2013 read with Rule 3(1) of the Companies (Corporate Social Responsibility Policy) Rules, 2014.

According to section 135(1) of the Companies Act, 2013, every company having net worth of rupees five hundred crore or more, or turnover of rupees one thousand crore or more or a net profit of rupees five crore or more during the immediately preceding financial year shall constitute a Corporate Social Responsibility Committee of the Board consisting of three or more directors, out of which at least one director shall be an independent director. Provided that where a company is not required to appoint an independent director under sub-section (4) of section 149, it shall have in its Corporate Social Responsibility Committee two or more directors.

As per Rule 3(1) of the Companies (Corporate Social Responsibility Policy) Rules, 2014, every company including its holding or subsidiary, and a foreign company defined under clause (42) of section 2 of the Act having its branch office or project office in India, which fulfills the criteria specified in sub-section (1) of section 135 of the Act shall comply with the provisions of section 135 of the Act and these rules.

According to section 135(5), the Board of every company referred to in sub-section (1), shall ensure that the company spends, in every financial year, at least two per cent. of the average net profits of the company made during the three immediately preceding financial years, or where the company has not completed the period of three financial years since its incorporation, during such immediately preceding financial years, in pursuance of its Corporate Social Responsibility Policy.

According to section 135(9), where the amount to be spent by a company under sub-section (5) does not exceed fifty lakh rupees, the requirement under sub-section (1) for constitution of the Corporate Social Responsibility Committee shall not be applicable and the functions of such Committee provided under this section shall, in such cases, be discharged by the Board of Directors of such company.

In terms of the above provisions of section 135(1) of the Companies Act, 2013 read with Rule 3(1) of the Companies (Corporate Social Responsibility Policy) Rules, 2014, the provisions of section 135 will be applicable to the Indian Branch of Chicago Bricks Inc. since the branch has earned a net profit of ₹ 17 crore [20% of ₹ 85 crore] in the immediately

preceding financial year (2024-2025), although its turnover was less than the stipulated ₹ 1,000 crore during the same period.

In terms of the above provisions of section 135(5), we can calculate the amount to be spent by the branch, which will be at least two per cent. of the average net profits of the company made during the three immediately preceding financial years.

2% of [(20% of ((75+65 + 85)/3)] = ₹ 15 crore] i.e. ₹ 30 lakh.

In terms of the above provisions of section 135(9), since the amount to be spent by the Indian Branch of Chicago Bricks Inc. under sub-section (5) does not exceed fifty lakh rupees, the requirement under sub-section (1) for constitution of the Corporate Social Responsibility Committee shall not be applicable and the functions of such Committee provided under this section shall, in such cases, be discharged by the Board of Directors of the Indian Branch (company).

Therefore, the view of Chicago Bricks Inc. is not correct as to applicability of formation of the CSR Committee in this case and the functions of such Committee be discharged by the Board of Directors of the Indian Branch (company).

Source⁠​‌​‌‌​‌​⁠: ICAI Suggested Answers, September 2025, 1(a) (New Scheme).

(b)As per Section 2(42) of the Companies Act, 2013, “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.

Applicability of Act to Foreign Companies: Sections 380 to 386 (both inclusive) and Sections 392 and 393 of the Companies Act, 2013 (the Act) shall apply to all foreign companies. It implies that all companies which falls within the definition of foreign company as per Section 2(42), shall comply with the provisions of this Chapter.

Requirement of holding of paid-up share capital:

As per Section 379(2) of the Act, where not less than 50% of the paid-up share capital, whether equity or preference or partly equity and partly preference, of a foreign company incorporated outside India is held by:

(i)one or more citizens of India; or

(ii)by one or more companies or bodies corporate incorporated in India; or

(iii)by one or more citizens of India and one or more companies or bodies corporate incorporated in India,

whether singly or in the aggregate, such foreign company shall also comply with the provisions of Chapter XXII and such other prescribed provisions of the Act with regard to the business carried on by it in India as if it were a company incorporated in India.

In the instant case, ABC Inc. will also be required to comply with the provisions of Chapter XXII as 50% of the shares of ABC Inc. are held by PQR Private Limited, a company incorporated in India.

Source⁠​‌​‌‌​‌​⁠: ICAI Suggested Answers, May 2025, 6(b) (New Scheme).

(a)As per section 2(42) of the Companies Act, 2013 (the Act), “Foreign Company” means any company or body corporate incorporated outside India which has a place of business in India whether by itself or through an agent, physically or through electronic mode; and conducts any business activity in India in any other manner.

So, as per the definition, we can conclude:

Case 1: Place of Incorporation - Singapore. Developed patient’s database for a Hospital in Mumbai - Server at Singapore.

It is a Foreign Company.

Though incorporated outside India, it is involved in transacting business in India and having place of business through electronic mode. Hence, it is a foreign company.

Case 2: Place of Incorporation - UAE. No place of business in India, but employs agents in India.

It is not a foreign company.

Since the company, though employed agents in India, but has no place of business in India. Hence, it is not a foreign company.

Case 3: Place of Incorporation and Registered Office - Cape Town; Board Meeting held in Leh, India.

It is not a foreign company.

Mere holding of meetings in India cannot be termed as conducting business activity in India. Hence, it is not a foreign company.

Case 4: Place of Incorporation and Registered Office - Germany; 49% shares are held by an Indian Company.

As per the question, the company is registered in Germany and no information is available about any business(es) being carried on by the company in India which is a basic condition to be fulfilled for being called a foreign company. Under the circumstances, it is just a company incorporated outside India and shall not be considered as a foreign company.

Alternate Answer

Applying the provisions of section 379 (2) of the Companies Act, 2013, if not less than 50% of the shareholding of a foreign company is held by an Indian Company; it is treated as an Indian Company, on which provisions of Chapter XXII of the Companies Act, 2013 applies. Here, only 49 % is held by Indian Company. Hence it is a foreign company.

Source⁠​‌​‌‌​‌​⁠: ICAI Suggested Answers, January 2025, 4(a) (New Scheme).

(b)(i) Whether Beauty Cosmetics shall be deemed to be a foreign company or an Indian company?

As per section 2(42) of the Companies Act, 2013, a ‘foreign company’ means any company or a body corporate incorporated outside India which has:

(a)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.

In the given question, Beauty Cosmetics, a Korean company has established a place of business in India (branch office in Chennai) and also carries on the business in India. Hence, Beauty Cosmetics shall be deemed to be a foreign company under the Companies Act, 2013 for the business carried on by it in India.

Further, according to section 379(2) of the Companies Act, 2013, where not less than 50% of the paid-up share capital, whether equity or preference or partly equity and partly preference, of a foreign company incorporated outside India is held by:

(i)one or more citizens of India; or

(ii)by one or more companies or bodies corporate incorporated in India; or

(iii)by one or more citizens of India and one or more companies or bodies corporate incorporated in India,

whether singly or in the aggregate, such foreign company shall also comply with the provisions of Chapter XXII and other prescribed provisions of the Companies Act, 2013, with regard to the business carried on by it in India as if it were a company incorporated in India.

In the given question, 50% (10% + 20% + 20%) of the share capital of Beauty Cosmetics (incorporated in Korea) is held by Mr. L (Indian Citizen), Mr. R (Indian Citizen) and Fairness Cosmetics Limited (Indian Company) respectively.

Hence, Beauty Cosmetics shall be deemed to an Indian company for the business carried on by it in India.

(ii)Whether Beauty Cosmetics, for the business carried on by it in India, be required to comply with the provisions of the Act?

Since, Beauty Cosmetics shall be deemed to an Indian company for the business carried on by it in India, it is required to comply with the relevant provisions of the Companies Act, 2013, as if it is an Indian company.

Source⁠​‌​‌‌​‌​⁠: ICAI Suggested Answers, September 2024, 6(b) (New Scheme).

(b)(i) As per section 145 of the Companies Act, 2013,

The person appointed as an auditor of the company shall sign the auditor’s report or sign or certify any other document of the company in accordance with the provisions of section 141(2) (i.e. in case of firm including LLP is appointed as an auditor of a company, only the partner who are Chartered Accountants shall be authorized to act and sign on behalf of the firm).

The qualifications, observations or comments on financial transactions or matters, which have any adverse effect on the functioning of the company mentioned in the auditor’s report shall be read before the company in general meeting and shall be open to inspection by any member of the company.

(ii)According to section 388 of the Companies Act, 2013,

(i)No person shall issue, circulate or distribute in India any prospectus offering for subscription in securities of a company incorporated or to be incorporated outside India, whether the company has or has not been established, or when formed will or will not establish, a place of business in India,-

(a)if, where the prospectus includes a statement purporting to be made by an expert, he has not given, or has before delivery of the prospectus for registration withdrawn, his written consent to the issue of the prospectus with the statement included in the form and context in which it is included, or there does not appear in the prospectus a statement that he has given and has not withdrawn his consent as aforesaid; or

(b)if the prospectus does not have the effect, where an application is made in pursuance thereof, of rendering all persons concerned bound by all the provisions of section 33 (Issue of application forms for securities) and section 40 (Securities to be dealt with in stock exchanges), so far as applicable.

(ii)For the purposes of this section, a statement shall be deemed to be included in a prospectus, if it is contained in any report or memorandum appearing on the face thereof or by reference incorporated therein or issued therewith.

Source⁠​‌​‌‌​‌​⁠: ICAI Suggested Answers, May 2024, 6(b) (New Scheme).