India Proposes to Amend the Term ‘Foreign Company’

The Ministry of Corporate Affairs informed the Upper House that, under the Companies Act (1956), there is no precise provision for compulsory registration of foreign companies engaged in online business practices. Keeping in view the present scenario which has been witnessing a large number of business transactions through the electronic mode, the Indian government has proposed to adapt the definition of the term, “foreign company,” under the Companies Bill (2011) to provide for effective regulation of such entities.

Clause 2(42) of the Bill defines the term “foreign company” to mean any company or corporate body incorporated outside of India which:

• Has a place of business in India whether by itself or through an agent, physically or through electronic mode
• Conducts any business activity in India in any other manner

Necessities in respect of various disclosures and other compliances to be made by foreign companies have been provided in Chapter 22 of the Companies Bill (2011) (Clauses 379-393).

The Companies Bill (2011) has been introduced in the Lower House on December 14, 2011 and the same has been referred to the Hon’ble Parliamentary Standing Committee on Finance.

The Minister was replying to a written question as to whether the government proposes to make enrollment mandatory for all foreign companies engaged in online business practices with the Register of Companies in a bid to make such companies engaged in online and direct to home business practices accountable.

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