Govt says 78 foreign companies registered in India last fiscal year

Govt says 78 foreign companies registered in India last fiscal year

Subject: Economy

Context: As many as 78 foreign companies were registered in the country under the company’s law in the last financial year, according to official data. In 2019-20, a total of 124 foreign companies were registered in India. The count was at 118 in 2018-19.

Concept:

Companies Act 2013

The Companies Act 2013 regulates the formation and functioning of corporations or companies in India. The first Companies Act after independence was passed in 1956, which governed business entities in the country.

By Section 135 of the 2013 Act, India became the first country to make corporate social responsibility (CSR) spending mandatory by law.

Currently, the Ministry of Corporate Affairs is administering the following Central government Acts:

1. Companies Act 2013
2. Companies Act 1956 (some provisions of this Act still apply)
3. Competition Act 2002
4. Insolvency & Bankruptcy Code, 2016
5. Chartered Accountant Act 1949

What is a foreign company?

Foreign Company is defined under Section 2 (42) of the Companies Act, 2013 (the Act) as any company 2013 (the Act) as any company or body corporate incorporated outside India which

 (a) Has a place of business in India by itself or through an agent, physically or thorough electronic mode and

 (b) Conducts any business activity in India in any other manner.

• Under Section 248, a company can be struck off from the official records subject to certain conditions. These include instances where the Registrar of Companies has a reasonable cause to believe that companies are not carrying on any business or operation for two immediately preceding financial years and have not made any application within such period for obtaining dormant company status.
• During the period from 2018 to June 2021, a total of 2, 38,223 companies were struck off from the official records under Section 248 of the Act.

‘Shell Company’

• There is no definition of the term ‘shell company’ under the Companies Act, 2013
• it normally refers to a company without active business operation or significant assets, which in some cases are used for illegal purpose such as tax evasion, money laundering, obscuring ownership, benami properties etc.
• A shell corporation is a corporation without active business operations or significant assets. These types of corporations are not all necessarily illegal, but they are sometimes used illegitimately, such as to disguise business ownership from law enforcement or the public.