Foreign Company Registration
Foreign Company Registration involves the legal Process of registering a Foreign Company in India to conduct its business Activities within the country. It refers to a company incorporated outside India but operating with a physical presence in India. Foreign Companies operating in India are Obligated to comply with various legal and regulatory Requirements ,including the filing of annual returns and Maintenance of Statutory records. They must also adhere to the Guidelines of the Foreign Exchange Management Act (FEMA) issued by the Reserve Bank of India (RBI). Depending on the Nature of their Business activities in India ,foreign companies may need to obtain additional Licenses and permits. Complying with these regulations ensures that foreign Companies operate within the legal framework and conduct their business smoothly in India.
Operating or registering a foreign company in India necessitates strict adherence to multiple regulations and guidelines. The Companies (Registration of Foreign Companies) Rules ,2014 ,outlines these guidelines and oversees the registration process for foreign companies in India. These regulations encompass rules concerning the disclosure of information about directors and secretaries to the Registrar. It is of utmost importance for business Owners to stay informed about these rules to ensure compliance and avoid potential penalties. By staying up-to-date with the regulations ,business owners can ensure a smooth and legally Compliant operation of their foreign company in India.
- In the Event of any Changes or modifications to the registration document submitted to the Registrar ,the foreign company is obligated to file Form FC-2. This form should contain comprehensive details of the alteration. It is Crucial for the company to submit this application within thirty days from the date of the alteration to ensure compliance with the regulatory requirements. Timely reporting of any Changes helps maintain accurate records and Facilitates smooth operations for the foreign company in India.
Companies (Registration of Foreign Companies) Rules
- Upon Establishing a place of business in India ,every foreign company is required to furnish specific information to the Registrar within thirty days. Apart from the details prescribed in the Companies Act ,2013 ,these companies must also publish a list of their directors and secretaries. This compliance ensures transparency and accountability in the operations of foreign companies in India and allows the regulatory authorities to maintain accurate records of their activities. Adhering to these Requirements is Essential to ensure legal Compliance and smooth business operations in the country.
- To Complete the registration process, these Companies need to Submit Form FC-1 along with the prescribed Fees to the Registrar ,as per the Companies (Registration Offices and Fees) Rules, 2014. The Application must include all the required Supporting documents mentioned in sub-section (1) of Section 380 of the Rules. Additionally ,it is essential for these companies to provide an attested copy of the approval obtained from the Reserve Bank of India. Complying with the Regulations of the Foreign Exchange Management Act also necessitates obtaining approval affidavits from other regulators. Fulfilling these requirements ensures the lawful establishment and operation of foreign companies in India.
Financial Statements of Foreign Companies
Foreign Companies operating in India are required to Prepare their Financial Statements According to Schedule III of the Rules. These Documents must be Submitted to the Registrar within Six months from the end of the Financial Year. In special Circumstances, the Registrar may Grant a three-month extension in Writing. The Financial documents that Such Companies must maintain and file include
- Documents to annex under Chapter IX of the Act, including the Accounts of Companies
- Latest consolidated financial statements of the parent foreign company. If such documents are not in English, a certified translation in English
- Statement of the related party transaction containing the following details:
- Name of the person in India who is a partner
- Nature of such relationship
- Description and nature of the transaction
- Amount of such a transaction during the year
- Opening, closing, highest, and lowest balance during the year
- Reason for such a transaction
- The material effect of such a transaction on both parties
- The amount is written off or written back to the related parties
- A declaration that such transactions were carried out at an arms’ length basis
- Any other details of the transaction to understand its financial impact
- Statement of repatriation of profits including the following details:
- Amount of profits repatriated
- Recipients of the repatriation
- Form and mode of repatriation
- Dates of repatriation and details if it is to a jurisdiction other than the residence of the beneficiary
- Approval of the Reserve Bank of India
- Statement of transfer of funds including the following details:
- Date of such a transfer
- Amount of fund transferred or received
- Mode of receipt or transfer of fund
- Purpose of such receipt or transfer
- Approval of the Reserve Bank of India or any other authority, if any.
Audit of Accounts and Returns:
- All foreign Companies operating in India are required to have their accounts related to Indian business operations prepared and audited by a practicing chartered accountant in India. The Rules and regulations Governing such audits will apply to foreign Companies in a manner that is Appropriate and necessary for their Specific Circumstances. Ensuring compliance with these audit requirements is essential to maintain transparency ,accuracy ,and accountability in the financial reporting of foreign companies in India.
- Every foreign company operating in India is required to submit Form FC-3 to the Registrar ,Containing a comprehensive list of all the places of business established in India as of the date of the Balance sheet. Additionally, these Companies must prepare and submit an annual return through Form FC-4 within sixty days from the last day of their financial year. All such returns and documents should be filed with the Registrar having jurisdiction over New Delhi.
- If a foreign Company ceases to conduct business in India ,it must promptly notify the Registrar about its closure. After the Registrar receives the notice of closure ,the Company will be relieved of any further obligation to Submit any Documents to the Registrar. Complying with these Requirements ensures that foreign companies maintain accurate and up-to-date records ,Adhering to the regulatory norms Governing their operations in India.
Certification of Foreign Companies
A Certified copy of the company’s constitution ,which may include statutes ,charter ,memorandum ,articles ,or other Relevant Instruments, must be submitted to the Registrar. If any changes are made to these documents and Subsequently delivered to the Registrar ,the altered documents must also be duly Certified in the same manner as the Original ones. This Certification ensures the authenticity and accuracy of the Company’s Constitution and any Modifications made to it.
If the company incorporation occurs in a country outside the Commonwealth, the following individuals can certify the copy mentioned above:
- An official of the Government where the original company resides
- Notary of such a country
- An officer of the company
Authentication of Translated Documents
- All documents submitted to the Registrar by Foreign companies must be in English. In case the original documents are not in English ,they should be accompanied by a certified translation in English ,adhering to the prescribed rules. If the translation is done outside India ,it can be certified by the following individuals through their signature and seal:
- The official having custody of the original
- A notary of the country where the company with incorporation
- If a country lies outside the Commonwealth ,a diplomat or a consular officer is Empowered to do so.
- If such translations are made in India, the following individuals can certify it through their signature and seal:
- An advocate, an attorney, or a pleader entitled to appear before any High Court
- Further ,an affidavit of a competent person having ,in the opinion of the Registrar ,an Adequate knowledge of the language of the original and of English.
Documents to Be Annexed to the Prospectus
The following documents must be annexed to the prospectus:
- Any consent to the issue of the prospectus needed from any person as an expert
- Contracts for an appointment of the managing director or manager or a memorandum giving full particulars
- All material contracts, not entered in the ordinary course of business, but entered within the preceding two years
- A copy of the underwriting agreement
- A copy of the power of attorney
- Action for improper use or description as a foreign company
Frequently Asked Questions:
A foreign company can engage in certain business activities in India without registering a local entity ,such as exporting goods and services or entering into contracts with Indian companies. However ,for a more extensive and permanent presence in India ,such as establishing a physical office or conducting a broader range of business activities, registering a local entity is generally necessary.
Indeed ,in many sectors ,a foreign company can have complete ownership (100%) of an Indian subsidiary, as per the Foreign Direct Investment (FDI) policy of the Indian Government. Nevertheless ,certain sectors have FDI caps or restrictions in place. To determine the specific requirements for your industry ,it is crucial to refer to the latest FDI policy and seek appropriate consultation.
Indeed ,a foreign company can repatriate its profits from India ,provided it adheres to the relevant regulations and fulfills tax obligations. Profits can be repatriated through various channels ,including dividends ,royalties ,or fees for technical services. For a clear understanding of the Repatriation process and tax implications, it is Advisable to seek guidance from a tax expert.
Registering a foreign company in India can take varying durations ,typically ranging from a few Weeks to several months. The timeline depends on the intricacy of the case and the Efficiency of the involved authorities. To ensure a Smooth entry into the Indian market ,it is vital to plan ahead and consider the time required for the registration process.