Background

Section 384 extends certain compliance obligations applicable to Indian companies to foreign companies operating in India. The objective is to ensure regulatory parity, transparency, and accountability in respect of their Indian business operations.

The provisions apply mutatis mutandis (with necessary modifications), meaning the framework applicable to Indian companies is adapted for foreign companies to the extent relevant to their Indian presence.

Key Compliance Requirements under Section 384

1. Debentures – Section 71

The provisions of Section 71 relating to debentures apply to foreign companies with necessary modifications.

Key Requirements:

• • Issuance of secured or unsecured debentures
  • Creation of Debenture Redemption Reserve (DRR), where applicable
  • Execution of debenture trust deed
  • Appointment of debenture trustees
  • Redemption of debentures
  • Buy-back of debentures

2. Annual Return – Section 92 read with Rule 7 of the Companies (Registration of Foreign Companies) Rules, 2014)

Every foreign company shall file an annual return with the Registrar in Form FC-4 within 60 days from the close of its financial year, along with the prescribed fee.

The Annual Return must contain details relating to:

• • Registered office and principal place of business in India
  • Members and debenture holders
  • Share capital and debentures
  • Indebtedness
  • Directors and Key Managerial Personnel

The return must be duly certified as prescribed.

3. Corporate Social Responsibility (CSR) – Section 135

Where a foreign company meets the prescribed financial thresholds under Section 135, it must comply with CSR provisions in respect of its Indian operations.

Obligations include:

• • Constitution of CSR Committee
  • Formulation of CSR Policy
  • Spending the prescribed percentage on CSR activities
  • CSR reporting and disclosure compliance

For more information refer: Corporate Social Responsibility under Section 135 of Companies Act, 2013

4. Books of Account – Section 128

Section 128 applies to foreign companies to the extent of requiring maintenance of books of account at their principal place of business in India, relating to Indian operations.

Scope of Maintenance (Indian Business Only):

Foreign companies must maintain records relating to:

• • Monies received and spent in India
  • Sales and purchases made in India
  • Assets and liabilities connected with Indian business

Book-Keeping Standards:

• • Proper books of account
  • Daily record of cash receipts and payments
  • Day-to-day recording of credit transactions
  • True and fair view of financial position
  • Proper explanation of transactions
  • Compliance with applicable accounting standards

Retention Period:

Books of account must be preserved for eight financial years.

5. Registration of Charges – Chapter VI (Section 384(4))

The provisions relating to registration of charges under Chapter VI apply mutatis mutandis to charges created or acquired by a foreign company on its properties in India.

Applicability: All charge registration requirements applicable to Indian companies equally apply to foreign companies with respect to Indian assets.

6. Inspection, Inquiry and Investigation – Chapter XIV (Section 384(5))

The provisions of Chapter XIV relating to inspection, inquiry, and investigation apply to the Indian business operations of a foreign company in the same manner as they apply to companies incorporated in India.

Scope: Limited strictly to business carried on in India.

Penalty & Punishment

In case of contravention:

• The foreign company shall be punishable with a fine not less than ₹1,00,000 which may extend to ₹3,00,000.
• For continuing default, an additional fine of ₹50,000 per day after the first day of default may be imposed.
• Every officer in default shall be punishable with a fine not less than ₹25,000 which may extend to ₹5,00,000.