# Exemption Power — International Financial Services Centres

## The Exemption Provision

The Central Government may, by notification, exempt any class of:

(a) Foreign companies; OR
(b) Companies incorporated or to be incorporated outside India, whether or not they have/will have a place of business in India,

...in so far as they relate to:

The offering for subscription in securities,
Requirements related to the prospectus, AND
All matters incidental thereto

— in the International Financial Services Centres (IFSC) set up under Section 18 of the Special Economic Zones Act, 2005.

## What is an IFSC?

An International Financial Services Centre is a financial centre catering to non-residents and residents (to the extent permitted) for financial services in any currency other than INR. GIFT City, Gandhinagar is India's flagship IFSC.

## Why the Exemption?

IFSCs are designed to attract global financial activity. Strict domestic disclosure norms may be excessive for sophisticated cross-border transactions occurring within IFSC. The exemption power enables a lighter-touch regulatory framework suited to international financial business.

## Scope Limitation — What the Exemption Covers

Covered	NOT Necessarily Covered
Offering for subscription in securities	Other Chapter XXII obligations not relating to securities offers
Prospectus requirements	General registration as a foreign company
Incidental matters	Conduct of ongoing business outside IFSC

## Key Statutory Reference

Section 18, Special Economic Zones Act, 2005 — governs the setting up and regulation of IFSCs.

Worked example

### Example 1

Example 1: A Cayman Islands fund wants to raise capital from IFSC investors in GIFT City using a streamlined disclosure document. — Result: Central Government may, by notification, exempt the fund from full Chapter XXII prospectus norms.

### Example 2

Example 2: A foreign company exempted for IFSC securities offering wishes to set up a place of business outside IFSC in Mumbai. — Result: Exemption does NOT cover the Mumbai business — full Chapter XXII compliance applies for non-IFSC activities.

⚠️ Common exam mistakes

Treating the exemption as automatic — it requires a notification by the Central Government.
Believing the exemption is blanket — it is limited to securities offering, prospectus, and incidental matters within IFSC.
Confusing SEZ Act, 2005 reference — IFSC is set up under Section 18 of the SEZ Act, not under the Companies Act.

Bare-Act text Chapter XXII (Exemption Provision) · Companies Act, 2013 (Exemption provision under Chapter XXII) · click to expand

The Central Government may, by notification, exempt any class of — (a) foreign companies; (b) companies incorporated or to be incorporated outside India, whether the company has or has not established, or when formed may or may not establish, a place of business in India, in so far as they relate to the offering for subscription in the securities, requirements related to the prospectus, and all matter incidental thereto in the International Financial Services Centres set up under section 18 of the Special Economics Zones Act, 2005.

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Exemption from Chapter XXII for IFSC (International Financial Services Centres)

Worked example

⚠️ Common exam mistakes