When Chapter XXII applies
A "foreign company" is a company or body corporate incorporated outside India that has a place of business in India, itself or through an agent, physically or electronically, and conducts business activity in India (section 2(42)). A branch in GIFT IFSC is such a place of business. Sections 380 to 386, 392 and 393 apply to every foreign company (section 379(1)). Where Indian citizens or Indian companies hold at least half of the foreign company's paid-up share capital, it must also comply with prescribed provisions as if it were an Indian company (section 379(2)).
A branch is not a separate legal person. It is part of the foreign company, which is why several IFSCA frameworks let a branch rely on the parent's capital and why a branch is taxed as a permanent establishment of the parent. See company, LLP or branch.
Registering the place of business
Within thirty days of establishing its place of business in India, the foreign company delivers to the Registrar (section 380(1)):
- a certified copy of its charter, statutes or memorandum and articles, with a certified English translation if needed;
- the full address of its registered or principal office;
- a list of its directors and secretary;
- the name and address of one or more persons resident in India authorised to accept service of process and notices on its behalf;
- the address of the office in India treated as its principal place of business;
- particulars of any earlier opening and closing of a place of business in India;
- a declaration that no director or the authorised representative has been convicted or debarred from forming or managing companies in India or abroad; and
- any other prescribed information.
The filing is made electronically in Form FC-1 under the Companies (Registration of Foreign Companies) Rules, 2014. Any alteration in these documents must be filed within thirty days (section 380(3)). There is no name reservation or incorporation step for a branch.
Choose the authorised representative with care. Process served on that person at the registered address is good service on the company (section 383), so the person must be reachable and must know what to do with legal papers.
Annual and continuing obligations
- Accounts. In every calendar year the foreign company makes out a balance sheet and profit and loss account in the prescribed form and delivers them to the Registrar, with a list of all its places of business in India (section 381); the filing is Form FC-3.
- Annual return. Section 92 applies to a foreign company, subject to the Rules (section 384(2)); the filing is Form FC-4.
- Books. Books of account for the Indian business are kept at the principal place of business in India (section 384(3)).
- Charges. The charge registration rules in Chapter VI apply to charges on property created or acquired by the foreign company (section 384(4)). See security and enforcement.
- Name display. The company's name and country of incorporation, and the fact of limited liability, must appear outside the office and on letters, bills and notices (section 382).
IFSC adjustment. MCA's notification G.S.R. 9(E) of 4 January 2017 inserted provisos into section 384(2) and (4) so that the exemptions given to IFSC companies under section 92 and Chapter VI apply equally to a foreign company with a place of business in the IFSC.
If the filings are missed
Failure to comply with Chapter XXII does not invalidate the branch's contracts, and the company can still be sued on them. But it cannot bring a suit, claim a set-off, counterclaim or start any legal proceeding on those contracts until it has complied (section 393). For a branch that may need to enforce a loan, a lease or a fee claim, that is the real sanction. Fines also apply to the company and to officers in default (section 392).
Alongside the Registrar
- IFSCA. The branch is registered under the activity framework that permits branches, such as banking units, branch FMEs or insurance offices. Some frameworks require comfort from the home regulator.
- SEZ. The branch is an SEZ unit and needs the Letter of Approval and the related undertakings. See the set-up sequence.
- Exchange control. A branch of a financial institution set up in the IFSC and permitted by a regulator is treated as a person resident outside India under the FEMA (IFSC) Regulations, 2015. See how FEMA treats IFSC units.
- Officers. IFSCA's principal officer and compliance officer requirements apply to the branch. See officer roles.
- Closure. Closing the branch means closing the place of business and the Chapter XXII filings as well as the IFSCA and SEZ steps. See exit.