A foreign company simply means a company or a body corporate which is incorporated outside India but has a place of business in India or or conducts any business activity in India in any other manner. Companies Act, 2013 and Companies (Registration of Foreign Companies) Rules, 2014 deals with the legal framework and provisions of foreign companies. Companies (Registration of Foreign Companies) Rules, 2014 sets out the detailed layman for incorporation of foreign companies or wholly owned subsidiaries (WOS) in India. It is very essential for Board of directors and members of such foreign companies to get aware of Indian laws well versed before setting up such foreign company. Ministry of Corporate (MCA) is a stream regulating all kinds of online fillings with the Government.
The rules governing Foreign Company/Wholly Owned Subsidiary are very strict and rigid in India. Thus it becomes very necessary for the Board of directors and members of the company to know the legal compliances once the company gets registered.
Here are some major post incorporation compliance for Foreign Company/Wholly Owned Subsidiary, non-compliance of which may attract various penal provisions as per Companies Act, 2013, FEMA Act and SEBI (If applicable)
A Foreign Company/Wholly Owned Subsidiary shall once incorporated file form FC-1 with the within 30 days of establishment of place of business in India along with the required documents with the concerned ROC.
It is mandatory to enter FCRN (Foreign Company Registration Number) of all other places in India if any by such Foreign Company Registration Number. Maximum 7 such offices details can be entered. If there are more than 7 then details can be given in necessary attachment(s)
Every foreign company on alterations in the charter or statute or any other instrument governing the company, alterations in the particulars of Director/Secretaries of the foreign company, any change in the registered or principal office of the company in the country of incorporation, any change in the particulars of authorized representative(s) of the company and any change in other places of business in India of the company, has to file eform FC-2 within 30 days of the alterations made.Mandatory attachment(s) Copy of approval letter (it is mandatory if any approval is required for such alteration)
Stamp duty on eform FC-1 shall be paid electronically through MCA government site. epayment of stamp duty is now applicable to every state of India.
Once Foreign Company/Wholly Owned Subsidiary is incorporated, the first and foremost step is opening of Bank Account in the name of the Company. Opening of bank account may require following documents-
Section 173(1), of The Companies Act 2013 deals with conduct of Board meeting of the companies. As per the provisions of the section, a company shall within 30 days from the date of its incorporation conduct first board meeting of the company. Directors can attend the meeting either in person or through video conferencing.
Once bank account is opened, the next compliance is of depositing the share capital money in the bank account within 60 days from the date of incorporation of the company.
The company shall issue share certificates to the shareholders of the company within 60 days from the date of incorporation of the company and pay stamp duty within 30 days from the date of allotment of shares as per the relevant stamp act applicable on the state.
On incorporation of Foreign Company/Wholly Owned Subsidiary, it is mandatory to intimate RBI through AD bank in ARF form within the period of 30 days from the date shares subscription money have been received from subscribers.
On incorporation of Foreign Company/Wholly Owned Subsidiary, it is mandatory to intimate RBI through AD bank in form FCGPR within the period of 30 days from the date of allotment of such shares.
As per Section 139 of the Companies Act, 2013 every company is required to appoint its first auditor within 30 days of incorporation by its board of directors and in case the board of directors fails to appoint the auditor within said period of 30 days then they shall call an extraordinary general meeting of shareholders for appointing an auditor. The appointment of auditor through shareholder must be completed within 90 days.
Once the company is registered, then every foreign company is required to affix its name at every place from where it is carrying on business all over India.
Section 12 mandate a company to print the following information on all its Business Letterhead / Billheads/Letter Papers etc.
At First board meeting, every director is under obligation to disclose his interest in any company/firm/body corporate/association of individuals as outlined in section 184(1) of the Companies Act 2013. Any changes in the disclosures shall be intimated by the director to board of directors in its first meeting held during each financial year. An independent director, if any, must give a declaration that he meets the criteria of independence during the first board meeting as a director.
It is mandatory as a post incorporation compliance for Foreign Company to maintain statutory registers like-
As a post incorporation requirements of a company, every company is required to file a declaration of commencement of business within 180 days from the date of incorporation of the company in accordance with the Companies (Amendment) Ordinance 2018, Section 10A, in form INC-20A.
As per section 128, every company shall maintain proper books of accounts which shall represent true and fair view of the financial disclosure of the company.
As a post Incorporation Compliance for Foreign Company, the next important step is obtaining shop act license immediately.hop & Establishment registration is state requirement . From state to start registration provisions may change. The basic documents for obtaining shop act license is MOA, AOA, COI, Directors KYC documents etc.
Content of Shop Act as below
Every business with annual turnover exceeds Rs. 40 lakhs or Service providers 20 lakhs is required to GST Registration under Goods and Services Tax (GST). However this registration can be applied suo moto. Where Foreign company finds that post registration , GST Registration is important for business then can apply for GST registration.
It is mandatory to obtain Professional Tax registration to company and all directors, all designated partners and all employers. However, all Union Territories including NCT of Delhi and certain states like Haryana, Punjab, Rajasthan, Uttar Pradesh etc. does not have any law to tax profession.
IEC (Import Export Code) is required to be obtained by the wholly owned subsidiary company in India if the business of the company is involved in the business of import/ export of goods and services.
Foreign Companies should make immediate provisions for safeguarding interest of trademark, copyrights, patents rights by making an application of trademark at www.ipindia.nic.in. Application of trademark is not mandatory for foreign Company but it is strongly recommended to apply for registered trademark owing to its huge legal infringement of rights benefits.
In this globalised legal world where every company is under obligation to comply with basic legal framework, Post Incorporation Compliance for foreign Company/ Wholly Owned Subsidiary is most essential and basic need from compliance in order to avoid heavy monetary as well as non-monetary penalties.