CA Inter P2 · Chapter 10

Companies Incorporated Outside India MCQs with Answers

6 multiple-choice questions on Companies Incorporated Outside India for CA Inter P2 Corporate and Other Laws. Try each one before revealing the answer and explanation.

1. Question 1

   Under section 2(42), which of the following is a 'foreign company'?

   • A) A company incorporated outside India that has a place of business in India, whether by itself, through an agent, physically or through electronic mode, and conducts business activity in India
   • B) A company incorporated in India that has a branch outside India
   • C) Any company listed on a stock exchange outside India
   • D) A company incorporated in India whose shares are held entirely by foreign nationals
   Show answer & explanation

   Answer: A) A company incorporated outside India that has a place of business in India, whether by itself, through an agent, physically or through electronic mode, and conducts business activity in India

   Section 2(42) defines a foreign company as a company or body corporate incorporated outside India which has a place of business in India by itself or through an agent, physically or through electronic mode, and conducts any business activity in India in any other manner. A company incorporated in India is never a foreign company, regardless of who owns its shares.

2. Question 2

   Under section 379, a foreign company must comply with Chapter XXII and other prescribed provisions as if it were a company incorporated in India where:

   • A) Not less than fifty per cent of its paid-up share capital is held by one or more citizens of India or companies or bodies corporate incorporated in India
   • B) Its turnover from business in India exceeds its turnover outside India
   • C) More than twenty-five per cent of its directors are citizens of India
   • D) Its principal place of business is in India
   Show answer & explanation

   Answer: A) Not less than fifty per cent of its paid-up share capital is held by one or more citizens of India or companies or bodies corporate incorporated in India

   Section 379 applies where not less than fifty per cent of the paid-up share capital (equity, preference or both) of a foreign company is held by citizens of India and/or companies or bodies corporate incorporated in India, singly or in aggregate. Such a company must then comply with the Chapter and other prescribed provisions for its business in India as if it were an Indian company.

3. Question 3

   Under section 380(1), a foreign company must deliver the prescribed documents to the Registrar for registration within:

   • A) Six months of commencing business in India
   • B) Thirty days of the close of its first financial year
   • C) Thirty days of the establishment of its place of business in India
   • D) Sixty days of the establishment of its place of business in India
   Show answer & explanation

   Answer: C) Thirty days of the establishment of its place of business in India

   Section 380(1) requires every foreign company to deliver documents to the Registrar within thirty days of establishing a place of business in India. These include a certified copy of its charter or memorandum and articles, its registered office address, a list of directors and secretary, and details of persons resident in India authorised to accept service. Any alteration must be filed within thirty days under section 380(3).

4. Question 4

   Which of the following is a requirement of section 382 for a foreign company?

   • A) It must add the word 'India' to the end of its name
   • B) It must keep its books of account only at its head office outside India
   • C) It must appoint an Indian citizen as its chairman
   • D) It must display its name and the country in which it is incorporated outside every office or place of business in India, in English and in a local language in use
   Show answer & explanation

   Answer: D) It must display its name and the country in which it is incorporated outside every office or place of business in India, in English and in a local language in use

   Section 382 requires every foreign company to conspicuously display, outside every office or place where it carries on business in India, its name and the country of incorporation, in English and in the local language in use there. The name and country must also appear on its business letters, bill-heads and letter paper, and in all notices and official publications. If members' liability is limited, that fact must also be stated.

5. Question 5

   A foreign company has not filed the documents required under Chapter XXII. It entered into a supply contract in India and now wishes to sue the buyer for non-payment. Under section 393:

   • A) The contract is valid, but the company cannot bring a suit in respect of it until it complies with the applicable provisions
   • B) The contract is void because of the non-compliance
   • C) The contract becomes voidable at the option of the buyer
   • D) The company can sue freely, since non-compliance only attracts a fine
   Show answer & explanation

   Answer: A) The contract is valid, but the company cannot bring a suit in respect of it until it complies with the applicable provisions

   Section 393 provides that failure to comply with Chapter XXII does not affect the validity of any contract, dealing or transaction, or the company's liability to be sued. However, the company cannot bring any suit, claim any set-off, make a counter-claim or start any legal proceeding in respect of it until it has complied with the provisions applicable to it.

6. Question 6

   For the purposes of Chapter XXII, section 386 provides that the expression 'place of business' includes:

   • A) Only a registered office of an Indian subsidiary
   • B) Only a manufacturing facility in India
   • C) A share transfer or registration office
   • D) Any place where its goods are sold by independent dealers
   Show answer & explanation

   Answer: C) A share transfer or registration office

   Section 386 states that 'place of business' includes a share transfer or registration office. The same section explains that 'certified' means certified as a true copy in the prescribed manner, and that 'director' includes any person in accordance with whose directions or instructions the Board of the foreign company is accustomed to act.