Section 391 of Companies Act, 2013 – Application of sections 34 to 36 and Chapter XX

SECTION 391. APPLICATION OF SECTIONS 34 TO 36 AND CHAPTER XX

[Sub-section (1) of Section 391 is effective from 1st April, 2014, sub- section (2) effective from 15th December, 2016]

(1) The provisions of sections 34 to 36 (both inclusive) shall apply to—

(i)   the issue of a prospectus by a company incorporated outside India under section 389 as they apply to prospectus issued by an Indian company;

(ii)   the issue of Indian Depository Receipts by a foreign company.

[(2) Subject to the provisions of section 376, the provisions of Chapter XX 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 this Chapter which have not been repaid or redeemed.] [1]

Applicable Circulars

Section 391(2) closure of place of business by a Foreign Company.

General Circular No. 01/ 2017, dated 22th  February, 2017

           Sub-Section (2) of Section 391 of the Companies Act, 2013, states that the provisions of Chapter XX 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. These provisions have been brought into force on 15th December, 2016. Stakeholders have sought clarification with regard to scope of application of the said sub-section.

2. The matter has been examined in the Ministry and it has been noted that sub-section (1) and sub-section (2) of section 391 needs to be read harmoniously. Accordingly, it is clarified that provisions of sub-section (2) of Section 391 of the Companies Act, 2013 would apply only in case of a foreign company which has issued prospectus or IDRs pursuant to provisions of Chapter XXII of Companies Act, 2013.

[1] Substituted by the Companies (Amendment) Act 2017 vide Notification No. File No. 1/1/2018-CL.I dated 9^th February, 2018. Prior to the substitution it read as under:

“(2) The provisions of Chapter XX 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.”