# Foreign Company — Definition under Section 2(42)
## 1. Regulatory Framework
The law applicable to foreign companies operating in India is contained in:
Sections 379 to 393A of the Companies Act, 2013
The Companies (Registration of Foreign Companies) Rules, 2014
## 2. The Statutory Definition — Sec. 2(42)
A 'foreign company' means any company or body corporate incorporated outside India which —
(a) has a place of business in India, whether by itself or through an agent, physically or through electronic mode; AND
(b) conducts any business activity in India in any other manner.
## 3. The Three-Pronged Test
Write the definition as an equation to remember it on exam day:
> Sec. 2(42) = Incorporated outside India + Place of business in India + Any business activity in India
All three must be present. A foreign-incorporated body that only holds passive investments in India (no place of business, no business activity) is not a foreign company under Sec. 2(42).
## 4. How Can 'Place of Business' Exist?
By the company itself, OR
Through an agent
Physically, OR
Through electronic mode
## 5. Meaning of 'Electronic Mode'
As per Rule 2(1)(c) of the Companies (Registration of Foreign Companies) Rules, 2014, 'electronic mode' means carrying out electronically based business operations — whether the main server is installed in India or not — including (but not limited to):
Business-to-Business and Business-to-Consumer transactions
Data interchange and other digital supply transactions
Offering to accept deposits, inviting securities, or providing financial services electronically, and
Web-based marketing, advisory and transactional services.
The key takeaway: a company doing online business in India can be a foreign company even if its servers are abroad.
Worked example
### Example 1
Example — Pure E-commerce Operations
A company incorporated in Singapore sells goods on its website to Indian consumers and has no office or staff in India. Its server is in Singapore. Is it a foreign company?
Answer: Yes. Sec. 2(42) covers companies that conduct business in India through 'electronic mode'. Rule 2(1)(c) expressly states that the location of the server is immaterial. Hence the Singapore company is a foreign company and must comply with Sections 379–393A.
### Example 2
Example — Passive Holding
UK Co. holds shares in an Indian subsidiary as a long-term investor but has no office, agent, or operations in India.
Answer: UK Co. is incorporated outside India but does not have a place of business or conduct any business activity in India. It is not a foreign company under Sec. 2(42).
⚠️ Common exam mistakes
Treating any foreign-incorporated company with an Indian shareholder/subsidiary as a foreign company under Sec. 2(42).
Believing that the company must have a physical presence — electronic mode is expressly included.
Believing the server must be located in India for the company to be covered — Rule 2(1)(c) clarifies it is not necessary.
Bare-Act text Section 2(42) and Rule 2(1)(c) · Companies Act, 2013 and Companies (Registration of Foreign Companies) Rules, 2014 · click to expand
Section 2(42): 'foreign company' means any company or body corporate incorporated outside India which—
(a) has a place of business in India whether by itself or through an agent, physically or through electronic mode; and
(b) conducts any business activity in India in any other manner.
Rule 2(1)(c), Companies (Registration of Foreign Companies) Rules, 2014: For the purposes of clause (42) of section 2 of the Act, 'electronic mode' means carrying out electronically based, whether main server is installed in India or not, including, but not limited to – business to business and business to consumer transactions, data interchange and other digital supply transactions; offering to accept deposits or inviting deposits or accepting deposits or subscriptions in securities, in India or from citizens of India; financial settlements, web-based marketing, advisory and transactional services, database services and products, supply chain management; online services such as telemarketing, telecommuting, telemedicine, education and information research; and all related data communication services, whether conducted by e-mail, mobile devices, social media, cloud computing, document management, voice or data transmission or otherwise.