No Automatic Data Sharing Between MCA, RBI For Foreign Company Registration: MCA

New Delhi, Sept 3 (KNN) The Ministry of Corporate Affairs (MCA) has clarified that there is currently no automatic data-sharing mechanism between the MCA and Reserve Bank of India (RBI) for registration of foreign companies.

In a frequently asked questions (FAQ) document on registration of foreign companies and subsidiaries of foreign bodies corporate, the MCA said documentation requirements of the two regulators are different. 
RBI approval does not replace separate MCA filing and documentation requirements, it added.

The clarification comes as foreign companies operating in India are required to comply with both the Companies Act and foreign exchange regulations, reported Financial Express.

NSWS Does Not Replace MCA Filings

The MCA said the National Single Window System (NSWS) can help foreign companies identify the approvals required for setting up operations in India. However, it does not replace MCA filings or approvals from sectoral regulators.

Foreign companies are required to file Form FC-1 along with applicable regulatory approvals, including those required from the RBI under the Foreign Exchange Management Act (FEMA).

Foreign Companies Can Operate Beyond BO, LO, PO Structures

The MCA also clarified that a foreign company is not restricted to operating through branch office (BO), liaison office (LO) or project office (PO) structures under FEMA.

Where a foreign company’s presence in India falls outside these categories, the Registrar of Companies (RoC) may seek clarification regarding the nature of the establishment.

The ministry noted that while foreign companies can use these FEMA structures to establish a physical presence without incorporating an Indian subsidiary, around 85-90 per cent continue to prefer setting up separate Indian subsidiaries. 

Such structures provide greater operational flexibility, allow manufacturing activities and offer access to lower domestic tax rates.

Resident Representative Not Required To Be Indian Director

The MCA said a foreign company is not required to appoint an Indian director. It must instead appoint one or more persons resident in India who can receive legal notices and official communications.

An Indian-incorporated company, however, must have at least one resident director, irrespective of the person’s citizenship.

Foreign-Owned Indian Companies Remain Indian Entities

The MCA further clarified that an Indian company does not become a “foreign company” merely because it is wholly owned by an overseas entity.

A subsidiary incorporated in India by a foreign entity remains an Indian company and does not fall under the definition of a foreign company under Section 2(42) of the Companies Act.

Similarly, an Indian company acquired entirely by a foreign company continues to remain an Indian company unless it ceases to be incorporated in India.

(KNN Bureau)