Chapter 11: Companies Incorporated Outside India - Test 1: answer key

Question 1 · 2 marks · Chapter 11: Companies Incorporated Outside India · medium

Scenario. Nordica MedTech GmbH, a company incorporated in Munich, Germany, develops telemedicine software and remote diagnostic platforms. On 1st April 2026, it launched a cloud-based subscription service for Indian hospitals and diagnostic centres, accessible through its servers located in Frankfurt. The service allows Indian doctors to upload patient data and receive AI-assisted diagnostic reports. Nordica has no physical office in India but its platform is actively marketed to Indian hospitals through a network of independent sales agents. On 15th May 2026, Nordica also acquired a 60% stake in Chennai-based HealthBridge Diagnostics Pvt Ltd, an Indian company. The remaining 40% of HealthBridge is held by Indian citizens. Nordica MedTech GmbH has not delivered any documents to the Registrar of Companies in India. The Indian sales agents have been signing service contracts with hospitals on behalf of Nordica. The company's board consists of three German nationals and one Indian resident, Dr. Ananya Rao, who is authorised to accept legal notices on behalf of Nordica in India. Nordica now seeks to expand its operations by establishing a liaison office in Bengaluru and appointing a resident director for its Indian operations. The company is unclear about its legal status and compliance obligations under the Companies Act, 2013.

Whether Nordica MedTech GmbH falls within the definition of a 'foreign company' under Section 2(42) of the Companies Act, 2013?

1. Yes, because it is incorporated outside India, has a place of business in India through electronic mode, and conducts business activity in India through its telemedicine platform. (correct answer)
2. No, because it does not have a physical place of business in India and merely operates through electronic mode, which is excluded from the definition.
3. No, because it has acquired 60% stake in an Indian company, and therefore it is deemed to be an Indian company under Section 379(2).
4. Yes, but only after it establishes a liaison office in Bengaluru, as electronic mode does not constitute a place of business in India.

Answer: A — Yes, because it is incorporated outside India, has a place of business in India through electronic mode, and conducts business activity in India through its telemedicine platform.

Explanation. Section 2(42) defines a foreign company as any company incorporated outside India which has a place of business in India whether by itself or through an agent, physically or through electronic mode, and conducts any business activity in India in any other manner. The Explanation to the definition expressly includes telemedicine and online services within 'electronic mode'. Nordica's cloud-based telemedicine platform marketed to Indian hospitals constitutes conducting business activity in India through electronic mode. Option (b)) is wrong because electronic mode is expressly included. Option (d) is wrong because a liaison office is not a prerequisite for foreign company status. Option (c) confuses the deeming provision under Section 379(2) with the definition itself.

Where it goes wrong. Students often assume that a physical office is mandatory for foreign company status and overlook the express inclusion of 'electronic mode' including telemedicine in the statutory definition.

Authority. Section 2(42) of the Companies Act, 2013; Rule 2(1)(c) of the Companies (Registration of Foreign Companies) Rules, 2014

Question 2 · 2 marks · Chapter 11: Companies Incorporated Outside India · hard

By what date was Nordica MedTech GmbH required to deliver the prescribed documents to the Registrar of Companies for registration, and to which Registrar?

1. Within 60 days of 1st April 2026 to the Registrar of Companies, Mumbai, as the nearest ROC to its sales agents.
2. Within 30 days of 1st April 2026 to the Registrar of Companies having jurisdiction over New Delhi, in Form FC-1. (correct answer)
3. Within 45 days of 1st April 2026 to the Registrar of Companies, Bengaluru, since it plans to establish a liaison office there.
4. Within 90 days of 1st April 2026 to the Central Registration Centre, as foreign companies are exempt from the 30-day timeline.

Answer: B — Within 30 days of 1st April 2026 to the Registrar of Companies having jurisdiction over New Delhi, in Form FC-1.

Explanation. Section 380(1) mandates every foreign company to deliver prescribed documents to the Registrar within 30 days of establishment of its place of business in India. Rule 3 of the Companies (Registration of Foreign Companies) Rules, 2014 requires such documents to be delivered to the Registrar having jurisdiction over New Delhi in Form FC-1 along with prescribed fees. The 30-day period commenced from 1st April 2026 when Nordica commenced its telemedicine operations in India through electronic mode, making its platform accessible to Indian hospitals. Option (a) wrongly extends the period to 60 days. Option (c)) wrongly selects Bengaluru ROC based on future plans. Option (d) incorrectly claims exemption from the 30-day timeline.

Where it goes wrong. Students may mistakenly apply the 60-day timeline applicable to annual returns under Section 384 or assume that a future liaison office determines jurisdiction, whereas Section 380(1) mandates 30 days and New Delhi ROC jurisdiction.

Authority. Section 380(1) of the Companies Act, 2013; Rule 3 of the Companies (Registration of Foreign Companies) Rules, 2014

Question 3 · 2 marks · Chapter 11: Companies Incorporated Outside India · hard

Dr. Ananya Rao, the Indian resident director authorised to accept legal notices, is served with a summons by an Indian hospital regarding a contractual dispute with Nordica. Whether such service on Dr. Rao is valid, and what is the consequence if Nordica fails to deliver the required documents to the Registrar?

1. Service on Dr. Rao is valid only if she holds a power of attorney authenticated by the Indian embassy, and the penalty for non-filing is ₹5,00,000 per day under Section 392.
2. Service on Dr. Rao is invalid because only the German board can accept service, and the penalty for non-filing is a fixed fine of ₹50,000 under Section 392.
3. Service on Dr. Rao is valid under Section 383 as she is authorised to accept service, and failure to deliver documents attracts a fine of ₹1,00,000 to ₹3,00,000 on the company with additional ₹50,000 per day for continuing default under Section 392. (correct answer)
4. Service on Dr. Rao is invalid because she is not a director under Section 386, and the company can escape liability by proving that it had no physical office in India.

Answer: C — Service on Dr. Rao is valid under Section 383 as she is authorised to accept service, and failure to deliver documents attracts a fine of ₹1,00,000 to ₹3,00,000 on the company with additional ₹50,000 per day for continuing default under Section 392.

Explanation. Section 383 provides that any process, notice, or other document required to be served on a foreign company shall be sufficiently served if addressed to any person whose name and address have been delivered to the Registrar under Section 380 and left at, or sent by post to, that address or by electronic mode. Dr. Rao, being the authorised person, validly received service. Section 392 prescribes a fine of not less than ₹1,00,000 but extending to ₹3,00,000 on the foreign company, and in case of continuing offence, an additional fine up to ₹50,000 for every day after the first during which the contravention continues. Option (b) understates the penalty. Option (a)) invents a power of attorney requirement and exaggerates the daily penalty. Option (d) misinterprets Section 386 which includes any person in accordance with whose directions the Board is accustomed to act as a director, and the lack of physical office is irrelevant.

Where it goes wrong. Students may confuse the penalty range and wrongly believe that service on a foreign company requires physical delivery at a foreign address, overlooking the statutory facility of service on the authorised resident person under Section 383.

Authority. Section 383 of the Companies Act, 2013; Section 392 of the Companies Act, 2013

Question 4 · 2 marks · Chapter 11: Companies Incorporated Outside India · hard

Nordica MedTech GmbH holds 60% of HealthBridge Diagnostics Pvt Ltd, an Indian company. The remaining 40% is held by Indian citizens. Which of the following statements is correct regarding the applicability of Section 379(2) to Nordica?

1. Section 379(2) applies only if 50% or more of Nordica's paid-up share capital is held by Indian citizens or Indian companies, and in this case, since Nordica is the holding company of an Indian subsidiary, it must comply with all provisions of the Companies Act as if it were an Indian company.
2. Section 379(2) is not attracted because the shareholding pattern of HealthBridge (the Indian company) is irrelevant to determining Nordica's compliance obligations.
3. Section 379(2) automatically applies to Nordica because any foreign company with an Indian subsidiary is deemed to be an Indian company under the Act.
4. Section 379(2) applies to Nordica only if its own paid-up share capital is at least 50% held by Indian citizens or Indian companies; the fact that Nordica holds 60% in an Indian company does not trigger Section 379(2). (correct answer)

Answer: D — Section 379(2) applies to Nordica only if its own paid-up share capital is at least 50% held by Indian citizens or Indian companies; the fact that Nordica holds 60% in an Indian company does not trigger Section 379(2).

Explanation. Section 379(2) applies where not less than 50% of the paid-up share capital of a foreign company incorporated outside India is held by Indian citizens or Indian companies or both. The provision examines the shareholding of the foreign company itself, not the shareholding of its Indian subsidiary. Nordica's own paid-up capital is held by German shareholders; it holds 60% in HealthBridge. Therefore, Section 379(2) is not attracted merely because Nordica owns an Indian subsidiary. Option (a) reverses the test by looking at Nordica's holding in HealthBridge instead of the holding in Nordica. Option (b) correctly states that HealthBridge's shareholding is irrelevant but arrives at the wrong conclusion about Section 379(2)'s applicability to Nordica. Option (c)) invents a deeming fiction that does not exist.

Where it goes wrong. Students frequently confuse the direction of shareholding and wrongly apply Section 379(2) when the foreign company owns an Indian subsidiary, whereas the provision tests whether Indians own 50% or more of the foreign company.

Authority. Section 379(2) of the Companies Act, 2013

Question 5 · 2 marks · Chapter 11: Companies Incorporated Outside India · medium

Scenario. Zenith Renewables PLC, a company incorporated in London, operates solar energy projects globally. It established a project office in Ahmedabad on 1st March 2026 for its Indian solar farm operations. As on the date of establishment, the following details were applicable: (i) paid-up share capital of Zenith PLC is GBP 10 million; (ii) 35% of its equity shares are held by GreenFund India Ltd, an Indian company; (iii) 20% of its equity shares are held by Mr. Rakesh Sharma, an Indian citizen residing in Delhi; (iv) the remaining 45% is held by UK institutional investors. Zenith Renewables PLC delivered its charter documents, address of its principal office in London, and a list of directors to the Registrar of Companies, New Delhi on 25th March 2026 in Form FC-1. However, it failed to include the name and address of a person resident in India authorised to accept service of process on its behalf. The company also did not file a declaration that none of its directors has been convicted or debarred from formation of companies. On 10th April 2026, Zenith PLC altered its charter to change its registered office address in London from Canary Wharf to Mayfair. It also wants to display its name outside its Ahmedabad office. The company's Indian project office manager is unsure whether the alteration in the foreign charter needs to be intimated to the Indian Registrar and in what form.

Whether Zenith Renewables PLC is required to comply with the provisions of Chapter XXII and other prescribed provisions of the Companies Act, 2013 as if it were an Indian company, given its shareholding pattern?

1. Yes, because 35% held by GreenFund India Ltd and 20% held by Mr. Rakesh Sharma aggregate to 55%, which is not less than 50% of Zenith's paid-up share capital, attracting Section 379(2). (correct answer)
2. No, because only 35% is held by an Indian company and 20% by an Indian citizen, which together fall short of the 60% threshold required under Section 379(2).
3. No, because the 45% held by UK institutional investors is the single largest block, and therefore foreign shareholding dominates, excluding Section 379(2).
4. Yes, but only if Zenith Renewables PLC voluntarily opts to be treated as an Indian company by passing a special resolution.

Answer: A — Yes, because 35% held by GreenFund India Ltd and 20% held by Mr. Rakesh Sharma aggregate to 55%, which is not less than 50% of Zenith's paid-up share capital, attracting Section 379(2).

Explanation. Section 379(2) provides that where not less than 50% of the paid-up share capital, whether equity or preference or partly equity and partly preference, of a foreign company incorporated outside India is held by one or more citizens of India, or by one or more companies or bodies corporate incorporated in India, or by both, whether singly or in the aggregate, such foreign company shall comply with the provisions of Chapter XXII and such other provisions as may be prescribed as if it were a company incorporated in India. GreenFund India Ltd (35%) and Mr. Rakesh Sharma (20%) together hold 55%, exceeding the 50% threshold. Option (b)) incorrectly applies a 60% threshold. Option (c) ignores the aggregate test. Option (d) wrongly introduces a voluntary opt-in requirement.

Where it goes wrong. Students may mistakenly believe that a simple majority or a higher threshold like 60% is required, or that the single largest block determines applicability, ignoring the statutory 'not less than 50% in the aggregate' test.

Authority. Section 379(2) of the Companies Act, 2013

Question 6 · 2 marks · Chapter 11: Companies Incorporated Outside India · hard

Zenith Renewables PLC delivered its documents to the Registrar on 25th March 2026 but omitted the name and address of a person resident in India authorised to accept service of process and the declaration regarding directors' convictions. What is the legal consequence of this omission under Section 380 read with the Companies (Registration of Foreign Companies) Rules, 2014?

1. The registration is automatically void, and Zenith must reapply afresh with a penalty of ₹10,00,000.
2. The Registrar may reject the incomplete Form FC-1, and Zenith remains liable for penalties under Section 392 until complete documents are delivered. (correct answer)
3. The omission is a procedural irregularity that can be cured later without any penalty, as the documents were filed within 30 days.
4. The omission is condoned if the company files a supplementary affidavit within 15 days, and no penalty applies.

Answer: B — The Registrar may reject the incomplete Form FC-1, and Zenith remains liable for penalties under Section 392 until complete documents are delivered.

Explanation. Section 380(1) read with Rule 3 requires the documents in Form FC-1 to include the name and address of one or more persons resident in India authorised to accept service of process and a declaration that none of the directors has been convicted or debarred. An incomplete Form FC-1 is not a valid compliance. The Registrar may reject the incomplete filing, and the company continues to be in contravention of Section 380, attracting penalties under Section 392 (fine of ₹1,00,000 to ₹3,00,000 plus ₹50,000 per day for continuing offence). Option (a) invents an automatic voiding and an arbitrary penalty. Option (c)) wrongly treats a mandatory statutory requirement as a curable irregularity. Option (d) creates a non-existent condonation mechanism.

Where it goes wrong. Students may think that filing within 30 days cures all defects, but the content requirements of Form FC-1 are mandatory, and incomplete filing constitutes non-compliance under Section 380.

Authority. Section 380(1) of the Companies Act, 2013; Rule 3 of the Companies (Registration of Foreign Companies) Rules, 2014; Section 392 of the Companies Act, 2013

Question 7 · 2 marks · Chapter 11: Companies Incorporated Outside India · medium

On 10th April 2026, Zenith Renewables PLC altered its charter to change its registered office address in London. By what date and in which form must Zenith intimate this alteration to the Registrar of Companies in India?

1. Within 15 days of 10th April 2026, i.e., by 25th April 2026, in Form FC-1 along with prescribed fees.
2. Within 60 days of 10th April 2026, i.e., by 9th June 2026, in Form FC-4 along with prescribed fees.
3. Within 30 days of 10th April 2026, i.e., by 10th May 2026, in Form FC-2 along with prescribed fees. (correct answer)
4. Within 90 days of 10th April 2026, i.e., by 9th July 2026, in Form FC-3 along with prescribed fees.

Answer: C — Within 30 days of 10th April 2026, i.e., by 10th May 2026, in Form FC-2 along with prescribed fees.

Explanation. Section 380(3) provides that where any alteration is made or occurs in the documents delivered to the Registrar under Section 380, the foreign company shall, within 30 days of such alteration, deliver to the Registrar for registration a return containing the particulars of the alteration in the prescribed form. Rule 3 prescribes Form FC-2 for this purpose. The alteration was made on 10th April 2026, so the 30-day period expires on 10th May 2026. Option (b) wrongly applies the 60-day timeline for annual returns in Form FC-4. Option (a)) wrongly applies a 15-day timeline and Form FC-1 (which is for initial registration). Option (d) wrongly applies a 90-day timeline and Form FC-3 (which is for the list of places of business).

Where it goes wrong. Students often confuse the timeline and form for alteration of foreign company documents with the timelines for annual returns (60 days, Form FC-4) or the list of places of business (Form FC-3).

Authority. Section 380(3) of the Companies Act, 2013; Rule 3 of the Companies (Registration of Foreign Companies) Rules, 2014

Question 8 · 2 marks · Chapter 11: Companies Incorporated Outside India · medium

Scenario. Meridian Analytics Inc., a company incorporated in Toronto, Canada, has no physical office in India. It provides data analytics services to Indian clients exclusively through its website and mobile application, with servers located in Canada. It also has a team of freelance consultants in India who pitch its services to prospective clients. Meridian has not delivered any documents to the Registrar of Companies. Which of the following statements is correct regarding Meridian's status under the Companies Act, 2013?

Meridian Analytics Inc., a company incorporated in Toronto, Canada, has no physical office in India. It provides data analytics services to Indian clients exclusively through its website and mobile application, with servers located in Canada. It also has a team of freelance consultants in India who pitch its services to prospective clients. Meridian has not delivered any documents to the Registrar of Companies. Which of the following statements is correct regarding Meridian's status under the Companies Act, 2013?

1. Meridian is not a foreign company because it has no physical place of business in India and merely provides services online.
2. Meridian becomes a foreign company only if it incorporates an Indian subsidiary for its operations.
3. Meridian is exempt from the definition of foreign company because its servers are located outside India.
4. Meridian is a foreign company because it conducts business activity in India through electronic mode and through agents in India, and is required to comply with Section 380. (correct answer)

Answer: D — Meridian is a foreign company because it conducts business activity in India through electronic mode and through agents in India, and is required to comply with Section 380.

Explanation. Section 2(42) includes within 'foreign company' any company incorporated outside India which has a place of business in India whether by itself or through an agent, physically or through electronic mode, and conducts any business activity in India. Meridian has freelance consultants acting as agents in India and provides services through electronic mode (website and mobile app) to Indian clients, with active marketing through agents. The location of servers outside India is irrelevant; 'electronic mode' includes carrying out electronically based activities whether the main server is installed in India or not. Option (a) ignores electronic mode and agency. Option (c) misinterprets the server location. Option (b)) adds a non-existent subsidiary requirement.

Where it goes wrong. Students may think that electronic mode requires servers in India or that online services without a physical office cannot constitute a place of business, overlooking the express statutory inclusion of remote electronic activity.

Authority. Section 2(42) of the Companies Act, 2013; Rule 2(1)(c) of the Companies (Registration of Foreign Companies) Rules, 2014

Question 9 · 2 marks · Chapter 11: Companies Incorporated Outside India · hard

Scenario. Helios Energy Holdings Ltd., incorporated in Singapore, has established a branch office in Pune. On 5th July 2026, it altered its memorandum of association to increase its authorised share capital. Under the Companies Act, 2013 and the Companies (Registration of Foreign Companies) Rules, 2014, which Form must Helios file with the Registrar to intimate this alteration, and within what period?

Helios Energy Holdings Ltd., incorporated in Singapore, has established a branch office in Pune. On 5th July 2026, it altered its memorandum of association to increase its authorised share capital. Under the Companies Act, 2013 and the Companies (Registration of Foreign Companies) Rules, 2014, which Form must Helios file with the Registrar to intimate this alteration, and within what period?

1. Form FC-2 within 30 days of the alteration. (correct answer)
2. Form FC-1 within 30 days of the alteration.
3. Form FC-4 within 60 days of the alteration.
4. Form FC-3 within 45 days of the alteration.

Answer: A — Form FC-2 within 30 days of the alteration.

Explanation. Section 380(3) mandates that any alteration in the documents delivered to the Registrar under Section 380 must be intimated within 30 days in the prescribed form. Rule 3 of the Companies (Registration of Foreign Companies) Rules, 2014 prescribes Form FC-2 for returns containing particulars of alterations. The memorandum of association is a charter document delivered under Section 380(1), so its alteration requires Form FC-2. Option (b)) wrongly uses Form FC-1, which is for initial registration. Option (c) wrongly applies Form FC-4, which is for annual returns. Option (d) wrongly uses Form FC-3, which is for the list of places of business, and applies the wrong timeline.

Where it goes wrong. Students may confuse Form FC-2 (alteration of documents) with Form FC-1 (initial registration), Form FC-3 (places of business), or Form FC-4 (annual return), and may incorrectly apply the 60-day timeline of annual returns.

Authority. Section 380(3) of the Companies Act, 2013; Rule 3 of the Companies (Registration of Foreign Companies) Rules, 2014

Question 10 · 2 marks · Chapter 11: Companies Incorporated Outside India · medium

Scenario. Crescent Pharma International Ltd., a foreign company with a branch in Hyderabad, failed to file its financial statements with the Registrar of Companies for the financial year ended 31st March 2026 within the prescribed time. The Registrar issued a notice on 1st December 2026. Which of the following is the correct penalty provision under Section 392 for this default?

Crescent Pharma International Ltd., a foreign company with a branch in Hyderabad, failed to file its financial statements with the Registrar of Companies for the financial year ended 31st March 2026 within the prescribed time. The Registrar issued a notice on 1st December 2026. Which of the following is the correct penalty provision under Section 392 for this default?

1. A fine of ₹25,000 on the company and ₹5,000 on every officer in default.
2. A fine of ₹1,00,000 to ₹3,00,000 on the foreign company and ₹25,000 to ₹5,00,000 on every officer in default, plus an additional fine up to ₹50,000 per day for continuing default. (correct answer)
3. A fine of ₹5,00,000 on the company and ₹1,00,000 on every officer in default, with no daily penalty.
4. A fine of ₹50,000 to ₹2,00,000 on the company and ₹10,000 to ₹50,000 on every officer in default, with no daily penalty.

Answer: B — A fine of ₹1,00,000 to ₹3,00,000 on the foreign company and ₹25,000 to ₹5,00,000 on every officer in default, plus an additional fine up to ₹50,000 per day for continuing default.

Explanation. Section 392 provides that if a foreign company contravenes any provision of Chapter XXII, the foreign company shall be punishable with fine which shall not be less than ₹1,00,000 but which may extend to ₹3,00,000, and in the case of a continuing offence, with an additional fine which may extend to ₹50,000 for every day after the first during which the contravention continues. Every officer of the foreign company who is in default shall be punishable with fine which shall not be less than ₹25,000 but which may extend to ₹5,00,000. Option (a) understates the penalty. Option (c)) omits the daily continuing penalty and misstates the officer penalty range. Option (d) invents a different penalty range.

Where it goes wrong. Students may misremember the penalty amounts or overlook the continuing offence component of ₹50,000 per day, and may confuse the company's penalty range with the officers' penalty range.

Authority. Section 392 of the Companies Act, 2013

Question 11 · 2 marks · Chapter 11: Companies Incorporated Outside India · hard

Scenario. Aurora Retail Solutions Ltd., incorporated in Dubai, has a branch in Mumbai. It issued a prospectus in India offering its securities for subscription. The prospectus included a statement purportedly made by an expert on the company's financial viability, but the expert's written consent was neither obtained nor stated in the prospectus. Which of the following is the correct legal position under Section 388 of the Companies Act, 2013?

Aurora Retail Solutions Ltd., incorporated in Dubai, has a branch in Mumbai. It issued a prospectus in India offering its securities for subscription. The prospectus included a statement purportedly made by an expert on the company's financial viability, but the expert's written consent was neither obtained nor stated in the prospectus. Which of the following is the correct legal position under Section 388 of the Companies Act, 2013?

1. The prospectus is valid if the company files the expert's consent after the prospectus is circulated but before allotment.
2. The prospectus is valid if the expert is a foreign national, as Section 388 applies only to Indian experts.
3. The prospectus is invalid because Section 388 prohibits its issue, circulation, or distribution in India without the expert's written consent and a statement that the consent has been given and not withdrawn. (correct answer)
4. The prospectus is valid because Section 388 applies only to prospectuses of Indian companies, not foreign companies.

Answer: C — The prospectus is invalid because Section 388 prohibits its issue, circulation, or distribution in India without the expert's written consent and a statement that the consent has been given and not withdrawn.

Explanation. Section 388 prohibits any person from issuing, circulating, or distributing in India any prospectus offering for subscription securities of a company incorporated outside India if the prospectus includes a statement purporting to be made by an expert, unless the expert has given his written consent to the issue of the prospectus with the statement included in the form and context in which it is included, and a statement to that effect appears in the prospectus. Option (b) wrongly introduces a nationality exception. Option (a)) wrongly permits post-circulation consent. Option (d) wrongly excludes foreign companies from Section 388's ambit.

Where it goes wrong. Students may think that Section 388 applies only to Indian companies or that consent can be obtained after the prospectus is issued, whereas the section requires prior written consent and a statement in the prospectus itself.

Authority. Section 388 of the Companies Act, 2013

Question 12 · 2 marks · Chapter 11: Companies Incorporated Outside India · hard

Scenario. Pinnacle Fintech Ltd., a foreign company with a place of business in India, failed to comply with the provisions of Chapter XXII regarding display of its name and country of incorporation outside its office in India. It later entered into a contract with an Indian vendor for software services. The vendor seeks to enforce the contract. Which of the following statements is correct under Section 393?

Pinnacle Fintech Ltd., a foreign company with a place of business in India, failed to comply with the provisions of Chapter XXII regarding display of its name and country of incorporation outside its office in India. It later entered into a contract with an Indian vendor for software services. The vendor seeks to enforce the contract. Which of the following statements is correct under Section 393?

1. The contract is void because the company's non-compliance with Chapter XXII invalidates all contracts entered into by it.
2. The contract is voidable at the option of the vendor, and Pinnacle is liable to be prosecuted under Section 392 for entering into a contract without compliance.
3. The contract is valid, and Pinnacle can sue the vendor without any restriction, as non-compliance with Chapter XXII is a mere technical irregularity.
4. The contract is valid and enforceable, but Pinnacle cannot bring any suit or legal proceeding to enforce the contract until it complies with Chapter XXII. (correct answer)

Answer: D — The contract is valid and enforceable, but Pinnacle cannot bring any suit or legal proceeding to enforce the contract until it complies with Chapter XXII.

Explanation. Section 393 provides that any failure by a company to comply with the provisions of Chapter XXII shall not affect the validity of any contract, dealing, or transaction entered into by the company or its liability to be sued in respect thereof. However, the company shall not be entitled to bring any suit, claim any set-off, make any counter-claim, or institute any legal proceeding in respect of such contract, dealing, or transaction until it has complied with the provisions of the Act. Option (a) wrongly treats the contract as void. Option (c) wrongly allows the company to sue without restriction. Option (b)) wrongly makes the contract voidable and invents a prosecution for entering into the contract.

Where it goes wrong. Students may think that non-compliance with Chapter XXII renders contracts void or that the company faces no disability, whereas Section 393 preserves the contract's validity but restricts the company's ability to sue until it complies.

Authority. Section 393 of the Companies Act, 2013

Question 13 · 2 marks · Chapter 11: Companies Incorporated Outside India · medium

Scenario. Trident Logistics GmbH, a German company with a branch in Chennai, filed its annual return in Form FC-4 on 30th September 2026 for the financial year ending 31st March 2026. The Registrar rejected the filing on the ground that it was filed beyond the prescribed period. Which of the following is the correct position under Section 384 of the Companies Act, 2013 read with the Companies (Registration of Foreign Companies) Rules, 2014?

Trident Logistics GmbH, a German company with a branch in Chennai, filed its annual return in Form FC-4 on 30th September 2026 for the financial year ending 31st March 2026. The Registrar rejected the filing on the ground that it was filed beyond the prescribed period. Which of the following is the correct position under Section 384 of the Companies Act, 2013 read with the Companies (Registration of Foreign Companies) Rules, 2014?

1. The annual return must be filed within 60 days from the last day of the financial year, and therefore the filing on 30th September 2026 was beyond the period. (correct answer)
2. The annual return must be filed within 90 days from the last day of the financial year, and therefore the filing on 30th September 2026 was within the period.
3. The annual return must be filed within 30 days from the last day of the financial year, and therefore the filing on 30th September 2026 was beyond the period.
4. The annual return must be filed within 45 days from the last day of the financial year, and therefore the filing on 30th September 2026 was beyond the period.

Answer: A — The annual return must be filed within 60 days from the last day of the financial year, and therefore the filing on 30th September 2026 was beyond the period.

Explanation. Section 384(2) read with Rule 7 of the Companies (Registration of Foreign Companies) Rules, 2014 requires every foreign company to prepare and file an annual return in Form FC-4 along with prescribed fees within 60 days from the last day of its financial year. The financial year ended on 31st March 2026, so the 60-day period expired on 30th May 2026. The filing on 30th September 2026 was therefore beyond the prescribed period. Option (c)) wrongly applies a 30-day timeline. Option (b) wrongly applies a 90-day timeline. Option (d) wrongly applies a 45-day timeline.

Where it goes wrong. Students may confuse the 60-day timeline for foreign company annual returns with the 30-day timeline for delivering documents under Section 380 or other timelines applicable to Indian companies.

Authority. Section 384 of the Companies Act, 2013; Rule 7 of the Companies (Registration of Foreign Companies) Rules, 2014

Question 14 · 2 marks · Chapter 11: Companies Incorporated Outside India · hard

Scenario. Vanguard Aerospace Ltd., incorporated in France, has a place of business in Bengaluru. It raised money from Indian investors through an offer of securities under Chapter XXII. The company later decided to close its place of business in India. Under Section 391(2) of the Companies Act, 2013, which of the following statements is correct regarding the consequences of such closure?

Vanguard Aerospace Ltd., incorporated in France, has a place of business in Bengaluru. It raised money from Indian investors through an offer of securities under Chapter XXII. The company later decided to close its place of business in India. Under Section 391(2) of the Companies Act, 2013, which of the following statements is correct regarding the consequences of such closure?

1. The closure is automatically effective upon intimation to the Registrar, and no further compliance is required.
2. The provisions of Chapter XX relating to winding up shall apply mutatis mutandis for closure of the place of business as if it were a company incorporated in India, if the foreign company has raised monies through offer or issue of securities under Chapter XXII which have not been repaid or redeemed. (correct answer)
3. The company is exempt from Chapter XX if it has been in existence for less than five years in India.
4. The closure requires prior approval of the Central Government, and Chapter XX has no application to foreign companies.

Answer: B — The provisions of Chapter XX relating to winding up shall apply mutatis mutandis for closure of the place of business as if it were a company incorporated in India, if the foreign company has raised monies through offer or issue of securities under Chapter XXII which have not been repaid or redeemed.

Explanation. Section 391(2) provides that, subject to Section 376 (power to wind up foreign companies although dissolved), the provisions of Chapter XX (winding up) shall apply mutatis mutandis for closure of the place of business of a foreign company in India as if it were a company incorporated in India, in case such foreign company has raised monies through offer or issue of securities under Chapter XXII which have not been repaid or redeemed. Option (a) wrongly suggests automatic closure without winding-up compliance. Option (c) invents a five-year exemption. Option (d) wrongly excludes Chapter XX and introduces a Central Government approval requirement.

Where it goes wrong. Students may assume that closing a foreign company's Indian place of business is a simple intimation, overlooking the special winding-up requirement under Section 391(2) when securities have been issued to Indian investors and remain unredeemed.

Authority. Section 391(2) of the Companies Act, 2013

Question 15 · 2 marks · Chapter 11: Companies Incorporated Outside India · hard

Scenario. NovaCare Health Ltd., a company incorporated in Australia, operates a chain of diagnostic centres in India through a branch office in Delhi. It prepared its financial statements for its Indian business operations for the year ended 31st December 2025 in accordance with Australian accounting standards. It filed the financial statements with the Registrar of Companies in India without attaching the statements of related party transactions, repatriation of profits, and transfer of funds, claiming that these were not applicable to its Indian operations. Which of the following is the correct legal position under Section 381 read with the Companies (Registration of Foreign Companies) Rules, 2014?

NovaCare Health Ltd., a company incorporated in Australia, operates a chain of diagnostic centres in India through a branch office in Delhi. It prepared its financial statements for its Indian business operations for the year ended 31st December 2025 in accordance with Australian accounting standards. It filed the financial statements with the Registrar of Companies in India without attaching the statements of related party transactions, repatriation of profits, and transfer of funds, claiming that these were not applicable to its Indian operations. Which of the following is the correct legal position under Section 381 read with the Companies (Registration of Foreign Companies) Rules, 2014?

1. NovaCare is exempt from attaching the three statements if it has no related party transactions and has not repatriated any profits during the year.
2. NovaCare can file financial statements prepared under Australian accounting standards without any attachment, as the Act permits foreign companies to follow their home country standards.
3. NovaCare is required to prepare its Indian financial statements in accordance with Schedule III or as near thereto as possible, and must attach the statements of related party transactions, repatriation of profits, and transfer of funds, even if nil, within six months of the close of the financial year. (correct answer)
4. NovaCare must file its financial statements within 30 days of the close of the financial year and is not required to attach any statements other than the auditor's report.

Answer: C — NovaCare is required to prepare its Indian financial statements in accordance with Schedule III or as near thereto as possible, and must attach the statements of related party transactions, repatriation of profits, and transfer of funds, even if nil, within six months of the close of the financial year.

Explanation. Section 381(1) requires every foreign company to prepare a balance sheet and profit and loss account in the prescribed form and deliver a copy to the Registrar. Rule 4 of the Companies (Registration of Foreign Companies) Rules, 2014 requires the financial statement of Indian business operations to be prepared in accordance with Schedule III or as near thereto as possible, and mandates attachment of the statement of related party transactions, statement of repatriation of profits, and statement of transfer of funds. These documents must be delivered within six months of the close of the financial year. Even if there are no such transactions, 'Nil' statements should be filed. Option (b) wrongly permits home-country standards without attachments. Option (a)) wrongly creates an exemption for nil transactions. Option (d) wrongly applies a 30-day timeline and omits the mandatory statements.

Where it goes wrong. Students may think that foreign companies can file financial statements in their home-country format without the prescribed attachments, or that 'Nil' statements are unnecessary when there are no such transactions.

Authority. Section 381 of the Companies Act, 2013; Rule 4 of the Companies (Registration of Foreign Companies) Rules, 2014