Globalisation has helped companies work in multiple countries seamlessly, reducing trade barriers and improving economic conditions. Foreign companies can incorporate and function in India if they follow certain compliance measures and guidelines.

Running or Registering a Foreign Company in India requires business owners to comply with various regulations and guidelines.  The Companies (Registration of Foreign Companies) Rules, 2014 prescribes these guidelines and regulates the registration of foreign companies in India. These regulations comprise rules relating to publishing details regarding directors and secretaries to the Registrar. It is crucial that business owners keep themselves updated regarding such rules to ensure compliance and prevent penalties.

Because companies having less than 20% of domestic content from government tenders are disqualified from public procurement possibilities, foreign firms have begun scrambling to set up establishments in India. Indian CA firms reported a rush from foreign companies to register in India to comply with the ‘Atma Nirbhar Bharat’ rules. Amit Maheshwari’s firm, Ashok Maheshwari and Associates, provides business advisory services to foreign companies and individuals. He believes that for a foreign individual, India continues to not be a lucrative goal for large-scale businesses.

Financial Statements of Foreign Companies

All foreign companies must prepare a financial statement of their business operations in India as per Schedule III of the Rules. Companies must deliver all such documents to the Registrar within six months of the close of the financial year. The Registrar may extend this period in writing by three months, if necessary under special circumstances. The financial documents that such companies need to maintain and file are as follows:

• Documents to annex under Chapter IX of the Act, including the Accounts of Companies
• The 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:

1. Name of the person in India who is a partner
2. The nature of such a relationship
3. Description and nature of the transaction
4. Amount of such a transaction during the year 
5. Opening, closing, highest, and lowest balance during the year
6. Reason for such a transaction
7. The material effect of such a transaction on both parties
8. The amount is written off or written back to the related parties
9. A declaration that such transactions were carried out at an arms’ length basis
10. Any other details of the transaction to understand its financial impact

• Statement of repatriation of profits including the following details:

1. Amount of profits repatriated
2. Recipients of the repatriation
3. Form and mode of repatriation
4. Dates of repatriation and details if it is to a jurisdiction other than the residence of the beneficiary
5. Approval of the Reserve Bank of India 

• Statement of transfer of funds including the following details:

1. Date of such a transfer
2. Amount of fund transferred or received
3. Mode of receipt or transfer of fund
4. Purpose of such receipt or transfer
5. Approval of the Reserve Bank of India or any other authority, if any.

Audit of Accounts and Returns:

Every foreign company must get its accounts pertaining to the Indian business operations prepared and audited by a practising chartered accountant in India. The provisions of the rules and regulations regarding such audits will apply, mutatis mutandis, to foreign private company.

Every foreign company must also file with the Registrar Form FC- 3 containing a list of all the places of business established in India as on the date of the balance sheet. Additionally, they must also prepare and file an annual return via Form FC-4 within sixty days from the last day of its financial year. Such institutions must file and deliver such returns and documents to the Registrar having jurisdiction over New Delhi. 

If a foreign company ceases to conduct business in India, it must provide notice regarding its closure to the Registrar. Once the Registrar receives the notice, the company no longer has an obligation to deliver any document to the Registrar.

Certification of Foreign Companies

A copy of any statutes, charter, memorandum, and articles or other instrument constituting or defining the company’s constitution must be duly certified as detailed below. Any altered document delivered to the Registrar must also be certified in the same manner.

If the company incorporation occurs in a country outside the Commonwealth, the following individuals can certify the copy mentioned above:

1. An official of the Government where the original company resides
2. Notary of such a country
3. An officer of the company 

These officials can certify the documents via the methods mentioned below:

• Signature or seal authenticated by a diplomatic or a consular officer 
• The certificate of the company’s officer must be signed before a person having the authority to administer an oath.

If the company incorporation occurs in a country within the Commonwealth, the following individuals can certify the copy mentioned above:

1. An official of the Government where the original company resides
2. Notary of such a country
3. An officer of the company, on oath before an individual with the power to administer an oath within the Commonwealth

If the company incorporation occurs in a country outside the Commonwealth but is a party to the Hague Convention, 1961, an official of the Government where the  original incorporation is committed can certify the copy, which would then need to be duly apostilled as per the Hague Convention

Additionally, the following documents must notarise and apostille in the country of origin as per the Hague Convention:

• List of directors and secretary 
• Signatures and the address on the Memorandum of Association and proof of identity of foreign nationals.

Authentication of Translated Documents

All the documents filed with the Registrar by the foreign companies must be in English, and if not, they must attach a translation in English duly certified as per the given rules. If such translations are made outside India, the following individuals can certify it 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:

1. Any consent to the issue of the prospectus needed from any person as an expert
2. Contracts for an appointment of the managing director or manager or a memorandum giving full particulars 
3. All material contracts, not entered in the ordinary course of business, but entered within the preceding two years
4. A copy of the underwriting agreement
5. A copy of the power of attorney
6. Action for improper use or description as a foreign company

If you have further doubts regarding registering a foreign company in India, feel free to reach out to us at Vakilsearch. Additionally, our legal representatives will collect the required information and assist you in completing your registration with ease.

Conclusion:

Navigating the regulations for establishing a new company registration in India as a foreign entity demands meticulous attention to compliance. From filing Form FC-1 and adhering to financial reporting obligations to obtaining approvals from regulatory bodies like the Reserve Bank of India, every step is crucial. The requirement for certified translations and detailed disclosures underscores the stringent oversight in place. For foreign companies eyeing India’s market under initiatives like ‘Atma Nirbhar Bharat’, engaging with experienced advisors becomes essential to ensure seamless adherence to the Companies (Registration of Foreign Companies) Rules, 2014.