# Foreign Company [Section 2(42)]

## Definition

A foreign company means any company or body corporate incorporated outside India which:

(i) has a place of business in India — whether:

by itself, or
through an agent,
physically or through electronic mode; AND

(ii) conducts any business activity in India in any other manner.

BOTH conditions (i) AND (ii) must be satisfied. Cumulative test.

## Key Elements Explained

### Incorporated Outside India

The company must be incorporated outside India — Indian-incorporated subsidiaries of foreign parents are NOT foreign companies; they are Indian companies.

### Place of Business

Wide test: physical office, branch, liaison office, agent, OR even electronic presence (server/website/digital infrastructure) targeting Indian customers can be a 'place of business'.

### Conducts Business Activity

Mere presence is not enough. There must be actual business activity in India.

## Why It Matters

Foreign companies are governed by Chapter XXII (Sections 379–393) of the Companies Act, 2013 — requiring registration with the Registrar, filing of documents, financial statements of Indian business, etc.

Worked example

### Example 1

Example 1: ABC Inc., a US company, opens a branch office in Mumbai which solicits orders and signs contracts with Indian customers. → Foreign company (place of business + business activity in India).

### Example 2

Example 2: XYZ Plc, a UK company, has no physical office in India but operates an e-commerce website and warehouse fulfilment via a logistics partner, selling to Indian consumers. → Foreign company (electronic mode place of business + business activity).

### Example 3

Example 3: PQR Ltd, Singapore, merely has a website accessible globally but no targeted Indian operations, no agent in India, no business transactions in India. → NOT a foreign company (no place of business + no business activity in India).

### Example 4

Example 4: LMN Ltd Australia incorporates an Indian subsidiary 'LMN India Pvt Ltd'. → The Indian subsidiary is an Indian company (not foreign), because it is incorporated in India. The parent LMN Ltd Australia is a foreign body corporate but is a 'foreign company' under Section 2(42) only if it itself has a place of business + business in India.

⚠️ Common exam mistakes

Treating Indian subsidiaries of foreign multinationals as foreign companies — they are Indian companies (incorporated in India).
Applying only one condition — both 'place of business in India' AND 'conducts business activity in India' must be satisfied.
Ignoring 'electronic mode' — websites, servers and digital infrastructure can constitute a place of business.
Treating a mere globally-accessible website with no Indian-targeted activity as creating a foreign company status.
Confusing 'foreign company' with 'foreign body corporate' — every foreign company is a body corporate, but not every foreign body corporate doing some isolated transaction in India is a 'foreign company' under Section 2(42).

Bare-Act text Section 2(42) · Companies Act, 2013 · 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.

Now that you've read this — what's next?

Move from understanding → mastery in 3 clicks. Each option below picks up from this lesson's topic.

🔥 Drill 5 Qs on this → ✍️ Adaptive practice →

Foreign Company - Section 2(42)

Worked example

⚠️ Common exam mistakes