Section 381 of Companies Act, 2013 – Accounts of foreign company

SECTION 381. ACCOUNTS OF FOREIGN COMPANY

[Effective from 1st April, 2014]

(1) Every foreign company shall, in every calendar year,—

(a)   make out a balance sheet and profit and loss account in such form, containing such particulars and including or having annexed or attached thereto such documents as may be prescribed; and

(b)   deliver a copy of those documents to the Registrar:

Provided that the Central Government may, by notification, direct that, in the case of any foreign company or class of foreign companies, the requirements of clause (a) shall not apply, or shall apply subject to such exceptions and modifications as may be specified in that notification.

EXEMPTIONS

Vide Notification No. F 1/23/2013 CL-V dated 19th July, 2016

Section 381(1)(a) shall apply to a foreign company which is an airline company having a share capital subject to the following exceptions and modifications, namely:-

1. It shall be deemed sufficient compliance of the provisions of clause (a) of sub-section (1) of section 381 of the Act, if in respect of the period ending on or after the 31st March, 2016, a company submits to the appropriate Registrar of Companies in India,-

(i) documents relating to copies of latest consolidated financial statements of the parent foreign company, as submitted by it to the prescribed authority in the country of its incorporation under the provisions of the law for the time being in force in that country:

Provided that where such documents are not in English language, there shall be annexed to it a certified translation thereof in the English language.

(ii) in respect of its Indian Business operations, a statement of receipts and payments for the financial year, duly authenticated by a practicing Chartered Accountant in India or a firm or a Limited Liability Partnership of practicing Chartered Accountants in India.

(iii) the documents required to be filed with Registrar of Companies under sub-rule (2) of rule 4 of the Companies (Registration of Foreign Companies) Rules, 2014.

2. Notwithstanding anything contained in the above paragraphs, the company shall, if so required by notice in writing from the Central Government, furnish to the Central Government such information with regard to its accounts as the Central Government may require.

(2) If any such document as is mentioned in sub-section (1) is not in the English language, there shall be annexed to it a certified translation thereof in the English language.

(3) Every foreign company shall send to the Registrar along with the documents required to be delivered to him under sub-section (1), a copy of a list in the prescribed form of all places of business established by the company in India as at the date with reference to which the balance sheet referred to in sub-section (1) is made out.

 

 Applicable Rules 

Companies (Registration of Foreign Companies) Rules, 2014

[Effective from 1st April, 2014]

Rule 4. Financial Statement of foreign company.—(1) Every foreign company shall prepare financial statement of its Indian business operations in accordance with Schedule III or as near thereto as may be possible for each financial year including—

(i)            documents required to be annexed thereto in accordance with the provisions of Chapter IX of the Act i.e. Accounts of Companies ;

(ii)           documents relating to copies of latest consolidated financial statements of the parent foreign company , as submitted by it to the prescribed authority in the country of its incorporation under the provisions of the law for the time being in force in that country:

Provided that where such documents are not in English language, there shall be annexed to it a certified translation thereof in the English language:

Provided further that where the Central Government has exempted or specified different documents for any foreign company or a class of foreign companies, then documents as specified shall be submitted;

(iii)         Such other documents as may be required to be annexed or attached in accordance with sub-rule (2).

(2) Every foreign company shall, along with the financial statement required to be filed with the Registrar, attach thereto the following documents; namely:—

(a)           Statement of related party transaction, which shall include—

(i)            name of the person in India which shall be deemed to be the related party within the meaning of clause (76) of section 2 of the Act of the foreign company or of any subsidiary or holding company of such foreign company or of any firm in which such foreign company or its subsidiary or holding company is a partner;

(ii)           nature of such relationship;

(iii)         description and nature of transaction;

(iv)          amount of such transaction during the year with opening ,closing, highest and lowest balance during the year and provisions made (if any) in respect of such transactions;

(v)           reason of such transaction;

(vi)          material effect of such transaction on both the parties;

(vii)         amount written off or written back in respect of dues from or to the related parties;

(viii)       a declaration that such transactions were carried out at arms length basis; and

(ix)          any other details of the transaction necessary to understand the financial impact;

(b)           Statement of repatriation of profits which shall include—

(i)            amount of profits repatriated during the year;

(ii)           recipients of the repatriation;

(iii)         form of repatriation;

(iv)          dates of repatriation;

(v)           details if repatriation made to a jurisdiction other than the residence of the beneficiary;

(vi)          mode of repatriation; and

(vii)         approval of the Reserve Bank of India or any other authority, if any.

(c)           Statement of transfer of funds (including dividends if any) which shall, in relation of any fund transfer between place of business of foreign company in India and any other related party of the foreign company outside India including its holding, subsidiary and associate company, include—

(i)            date of such transfer;

(ii)           amount of fund transferred or received;

(iii)         mode of receipt or transfer of fund;

(iv)          purpose of such receipt or transfer; and

(v)           approval of Reserve Bank of India or any other authority, if any.

(3) The documents referred to in this rule shall be delivered to the Registrar within a period of six months of the close of the financial year of the foreign company to which the documents relate:

Provided that the Registrar may, for any special reason, and on application made in writing by the foreign company concerned, extend the said period by a period not exceeding three months.

Rule 5. Audit of accounts of foreign company.—(1) Every foreign company shall get its accounts, pertaining to the Indian business operations prepared in accordance with the requirements of clause (a) of sub-section (1) of section 381 and rule 4, audited by a practicing Chartered Accountant in India or a firm or limited liability partnership of practicing chartered accountants.

Explanation.—For the purposes of this sub-rule, the expressions “Chartered Accountant”, “Firm” and limited liability partnership shall have the meanings respectively assigned to them under the Act and Limited Liability Partnership Act, 2008 (6 of 2009) respectively.

(2) The provisions of Chapter X i.e. Audit and Auditors and rules made there under, as far as applicable, shall apply, mutatis mutandis, to the foreign company.

Rule 6. List of places of business of foreign company.—Every foreign company shall file with the Registrar, along with the financial statement, in Form FC.3 with such fee as provided under Companies (Registration Offices and Fees) Rules, 2014 a list of all the places of business established by the foreign company in India as on the date of balance sheet.

Rule 7. Annual Return.— Every foreign company shall prepare and file, within a period of sixty days from the last day of its financial year, to the Registrar annual return in Form FC.4 along with such fee as provided in the Companies (Registration Offices and Fees) Rules, 2014 containing the particulars as they stood on the close of the financial year.