FOREIGN COMPANIES

Part XI of the Companies Act, 1956 containing Section 591 to 608 deals with the Companies incorporated outside India i.e. a "Foreign Company." The provisions of this part of the Companies Act, 1956 prescribes that its Sections 592 to 602 shall be applicable to Companies who are incorporated outside India which after the commencement of the Companies Act, 1956 establishes a place of business within India and Companies incorporated outside India having established place of business within India prior to the commencement of the Companies Act, 1956 and continue to have the said establishment. It says that a Company incorporated outside India and having an established place of business in India in which 50% or more paid up share capital is held by Indians then provisions of those sections shall apply to such Companies also.
Sections 592 to 602 applicable to such Foreign companies provide that they have to file with the Registrar of Companies:
- Various documents giving particulars,
- Returns regarding any alterations in the company,
- Balance-sheet and Profit & Loss Accounts of the company,
- Charges on any of the Companies' properties in India.
It also provides that the following provisions shall apply to Indian business of a Foreign Company:
- Registration of charges,
- Right to obtain copies of and inspect the trust deed,
- Books of account to be kept by the Company,
- Annual returns to be made by the Company,
- Inspection of books of accounts,
- Power of Central Government to direct special audit,
- Audit of cost accountants,
-Power of Registrar to call for inspection and investigation
(Contained in Sections 124 to 145, 125, 127, 118, 209, 159, 209-A,, 233-A, 233B, and 234 to 246 of the Companies Act)
Section 603 of the said part XI puts certain restriction on a foreign company offering documents for subscriptions in India.
Though under the Companies Act, 1956, no formalities are required to be carried out for a Foreign Company establishing place of business in India except the filing of the documents provided for in Part XI; under the provisions of Section 29 of the Foreign Exchange Regulation Act, 1973 general or special permission of the Reserve Bank of India for continuing any place of business or establishing any place of business for carrying on activities of trade and Commercial nature by a foreign company is required.
General:
The limit of the foreign equity in an Indian Company is now increased up to 51% from the earlier 40%. In certain cases 100% foreign equity participation is also now allowed. The Government of India has entered into agreements with major foreign countries including USA for avoiding double taxation.

List of Countries with whom India has Double Taxation Agreements

A: Austria · Australia
B: Belgium · Bangladesh · Brazil
C: Canada · Czechoslovakia
D: Denmark
F: FRG · Finland · France
G: Great Britain · Greece
H: Hungary
I: Indonesia · Italy
J: Japan
K: Kenya · Korea(South)
L: Libya
M: Malaysia · Mauritius
N: Nepal · Netherlands · New Zealand · Norway
P: Poland
R: Romania
S: Singapore · Spain · Sri Lanka · Sweden · Syria
T: Tanzania · Thailand
U: United Arab Emirates · USA
Z: Zambia