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Enrolling a Foreign Enterprise in India

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Last Updated on January 6, 2024 by Kanakkupillai

One must follow several laws and standards to operate or register a foreign company in India. These regulations are outlined in the Firms (Registration of Foreign Companies) Rules, 2014, which also controls how foreign companies are registered in India. These regulations provide specifications for providing the Registrar with information on directors and secretaries. Company owners must be educated about such regulations to maintain compliance and prevent fines.

Foreign companies are now making strong efforts to establish a presence in India due to the requirement that businesses with less than 20% indigenous content are ineligible for government tenders. Foreign companies aiming to comply with the “Atma Nirbhar Bharat” legislation have registered more often, according to Indian chartered accounting (CA) firms. Amit Maheshwari, the owner of Ashok Maheshwari and Associates, which provides business consultancy services to foreign companies and people, contends that large-scale foreign companies continue to find India less alluring than other countries.

Registration of Foreign Companies Rules

According to the Companies (Registration of Foreign Companies) Rules, foreign companies operating in India must comply with the following conditions listed below:

  • Mandatory Information Submission: Within thirty days of establishing a commercial presence in India, foreign companies must submit particular information to the Registrar. These specifics comprise a thorough list of directors, secretaries, and information previously provided in the Companies Act of 2013.
  • Form FC-1 and Fee Payment: foreign companies must file Form FC-1 and pay the required fees to the Registrar to register. The 2014 Companies (Registration Offices and Fees) Rules provide fee standards. These applications must also be accompanied by the supporting paperwork listed in Section 380(1) of the Rules. Additionally, by the Foreign Exchange Management Act, foreign companies must submit an authenticated copy of the Reserve Bank of India’s permission and approved affidavits from other regulators.
  • Alteration Reporting: The foreign company must submit Form FC-2 if any modifications or alterations are made to the registration papers submitted to the Registrar. This document, which must be completed within 30 days of the date of the modification, must include thorough information about the alteration.

Financial Statement of Foreign Companies

Financial statements must be prepared in line with Schedule III of the Rules by foreign companies operating in India. Within six months of the conclusion of the fiscal year, the Registrar must receive these financial records. In extraordinary situations, if there are compelling reasons, the Registrar may grant a written extension for a maximum of three months. The financial records that foreign companies are required to keep and submit include:

  • Documents that fall under the definition of Chapter IX of the Companies Act and include a company’s accounts.
  • The parent foreign company’s most recent consolidated financial results. A certified English translation must be offered if these papers are not in English.
  • The following details should be included in the related party transaction statement:
  1. The partner’s Indian name.
  2. The nature of the connection.
  3. Type of transaction and its description.
  4. Amount of transactions during the year.
  5. Balances at the year’s beginning, end, peak, and lowest points.
  6. The purpose of the transaction.
  7. Significant effect on both parties.
  8. The Amount returned to linked parties or written off.
  9. Declaration of an arm’s-length basis for transactions.
  10. Any more transactional information is needed to understand finances.
  • The following details should be on the statement of profits repatriated:
  1. The amount of profits brought home.
  2. Those who will be repatriated.
  3. Repatriation’s form and manner.
  4. Dates of repatriation and information if it is to a country other than the beneficiary’s home.
  5. If necessary, authorization from the Reserve Bank of India.
  • The following information should be included in the statement of transfer of funds:
  1. When the funds were transferred.
  2. The amount of money sent or received.
  3. Mode of money receiving or transmission.
  4. The reason for the receipt or transfer of funds.
  5. Approval from the Reserve Bank of India or, if necessary, any other pertinent authority.

Audit of Accounts and Returns

The following laws govern the audit of accounts and returns for foreign companies doing business in India:

  • Audit Requirement: Foreign companies must hire an active chartered accountant in India to compile and audit the accounts for their Indian commercial activities. With the required amendments, international corporations are subject to the laws and regulations governing such audits.
  • Filing of Form FC-3: The Registrar must receive Form FC-3 from foreign companies. A list of all the businesses they have created in India as of the balance sheet date should be included in this form.
  • Annual Return using Form FC-4: Within sixty days of the end of their fiscal year, foreign companies must additionally complete and submit an annual return using Form FC-4. These returns and paperwork must be delivered to the Registrar in charge of New Delhi.
  • Closure Notification: It is crucial to inform the Registrar of a foreign company’s closure if it decides to stop doing business in India. The business is released from its duty to provide the Registrar with any additional documentation upon receipt of this notification by the Registrar.

Certification of Foreign Companies

The following rules apply, particularly if the company formation took place in a country outside the Commonwealth, to seek certification for papers such as laws, charters, memoranda, articles, or any other instrument describing a foreign company’s constitution:

  • Government Official: The certification may be issued by a representative of the nation’s government in which the primary business is registered.
  • Notary Public: The copy may also be certified by a notary public from a foreign nation.
  • Company official: The document may be certified by an official of the foreign company.

Methods to Certify the Documents

The following procedures can be used to certify documents by the officials previously mentioned:

  • Signature or Seal Authenticated by a Diplomatic or Consular Officer: The signature or seal of the pertinent government official, such as a diplomatic or consular officer, may be authenticated to certify the document.
  • Company official’s Certificate: If a company official attests to the document, they must sign their certificate before a witness is qualified to administer an oath. This gives the certification procedure an additional element of formality and validity.

Apostille Requirements for Foreign Company Documents

The following people may certify the necessary documents when a company is established in a Commonwealth country:

  • A representative of the government of the country in which the business is registered.
  • A local notary public from that country.
  • A company officer who takes the oath in front of a Commonwealth official authorized to administer oaths.

A government representative from the place of incorporation may do certification on behalf of businesses formed in non-Commonwealth countries but still parties to the Hague Convention of 1961. However, by the Hague Convention, this certification must be followed by the apostille procedure.

The Hague Convention also requires that certain papers, including the list of directors and the secretary, the signatures and addresses on the Memorandum of Association, and identification documents for foreign people, be notarized and apostilled in the country of origin.

Authentication of Translated Documents for Foreign Companies

Foreign companies must use English when submitting documentation to the Registrar. A verified English translation is needed if not. One method for certification is as follows:

International Translations:

  • The official in possession of the original paper.
  • A local notary public in the nation of incorporation.
  • A diplomat or consular official may certify for non-Commonwealth countries.

Translations Made in India:

  • A representative who is qualified to represent a party in court.
  • An affidavit from a qualified individual, as assessed by the Registrar, who possesses enough understanding of both the original language and English.

Annexed Documents in the Prospectus

The following records must be included in the prospectus:

  • Any needed expert’s approval is supporting the prospectus.
  • Contracts outlining the management or managing director’s appointment or a memo outlining all the specifics.
  • All key agreements were made during the two years before but were not carried through in the regular course of business.
  • A copy of the underwriting contract.
  • The power of attorney’s copy.
  • Actions made in response to inaccurate usage or designation as a foreign company.

Conclusion

We at Kanakkupillai are your dependable guide through the complexities of forming a foreign company in India. Our knowledgeable legal counsel staff offers crucial support in compiling necessary data and streamlining your registration procedure. Your introduction to the Indian market will be seamless and trouble-free with our knowledge, guaranteeing that you can confidently follow all relevant legislation and norms. We are the go-to choice for foreign companies looking to create a strong and compliant presence in India due to our constant dedication to providing top-notch services and our extensive grasp of Indian business legislation. You have a devoted partner in Kanakkupillai who is committed to your success in the Indian market. Please do not hesitate to contact us at Kanakkupillai if you have any questions.

Divya

Telecom engineer turned content creator with a knack for crafting compelling narratives. Experienced in client management and community engagement, and ventured into freelance content creation, contributing tailored and impactful content across diverse industries. Currently, collaborating with companies like Kanakkupillai, dedicated to delivering inspiring technical content rooted in a solid foundation.