Application of Act to Foreign Companies

20.1 Section 379 of the Act provides that where not less than fifty percent of the paid-up share capital of a foreign company is held by one or more citizens of India, or companies/body corporates incorporated in India, such companies shall comply with the provisions of Chapter XII, and other provisions of the 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. It was put to the Committee to clarify the position on the applicability of the provisions of Chapter XXII, to those body corporates that were covered within the definition of Section 2(42), but did not fall within the category indicated in Section 379 of the Act.

20.2 The Committee felt that as was clearly provided under Section 591(1) of the Companies Act, 1956, it may be specifically provided that the remaining body corporates as covered within the definition of foreign company, would need to comply with the provisions of Chapter XXII, as applicable. In this regard, necessary amendment in Section 379 was also recommended with respect to the threshold on transactions, etc. conducted by such companies, to be prescribed in the relevant Rules (refer paragraph 1.10 of Part I of the report also).

Application of companies law to foreign companies: broader Chapter XXII compliance with rule-based transaction thresholds. Proposed amendments clarify that foreign body corporates within the statutory definition must comply with Chapter XXII obligations, and that the threshold provision will be amended to permit prescription in Rules of the transactional or operational thresholds determining the extent of compliance with domestic chapters.