SECTION 594

ACCOUNTS OF FOREIGN COMPANIES

Exceptions and modifications with which sub-section (1) applies to a foreign company

Notification 1

In exercise of the powers conferred by the proviso to sub-section (1) of section 594 of the companies Act, 1956 (hereinafter referred to as "the Act") the Central Government has directed that the requirements of clause (a) of sub-section (1) shall apply to a foreign company having a share capital subject to the exceptions and modifications specified below, namely :

i) A foreign company shall, in respect of its Indian business, submit to the appropriate Registrar in triplicate its balance sheet and profit and loss account in such form, containing such particulars and including or having annexed or attached thereto such documents as under the provisions of the Act, it would, if it had been a company within the meaning of the Act, have been required to make out and lay before the company in general meeting.

ii) The working capital earmarked for its branch, if any, shall be shown in the balance sheet.

iii) The profit and loss account in respect of its Indian business shall disclose the net profit or loss for the year transferred to its principal office in the country of incorporation.

iv) The balance sheet and profit and loss account of the Indian business of the foreign company in terms of clause (i) shall be audited by such person or persons and in such manner as laid down in the Act. In regard to the said balance sheet and profit and loss account relating to a period on or before the 31st day of March, 1958, it shall be deemed to be sufficient compliance if such documents are audited by auditors of the foreign company in the country of its incorporation.

v) Omitted by GSR 489, dated 1-4-1961.

vi) The foreign company shall also submit to the appropriate Registrar three copies of the authenticated balance sheet and profit and loss account (including documents relating to every subsidiary of the foreign company) as submitted by it to the prescribed authority in the country of its incorporation under the provisions of the law in that country.

vii) The Government shall have authority, when there is difficulty in reconciling the balance sheet and profit and loss account of a foreign company, submitted in accordance with clause (i), with the balance sheet and profit and loss account, filed by that company in the country of its incorporation, to seek clarification or demand the making of the balance sheet and profit and loss account, filed in that country, as far as practicable, in such form as it would, if it had been a company within the meaning of the Act, have been required to make out and lay before the company in a general meeting and the foreign company shall be found to make such clarification or comply with such demand, as the case may be

viii) In regard to a foreign shipping or an airlines company, it shall be deemed to be sufficient compliance of the provisions of Part II of Schedule VI to the Act, if the profit and loss account of such companies prepared in terms of clause (i) discloses under broad heads the items of indirect expenditure (relating to an entire voyage or flight which cannot be directly charged against the Indian business of such companies) allocated on a reasonable basis.

ix) it shall be deemed sufficient compliance of the provisions of section 594 of the Act, if the balance sheet in respect of the period ending on or before the 31st day of December, 1956, are filed in the manner laid down in sub-section (3) of section 277 of the Indian Companies Act, 1913..

x) In the case of a foreign company which, if incorporated under the Act would have been deemed to be a private company within the meaning of clause (iii) of sub-section (1) of section 3 of the Act. No person other than a member of the company concerned shall be entitled to inspect or obtain copies of--

a) the profit and loss account of its Indian business submitted to the appropriate Registrar in terms of clause (i) hereof;

b) the profit and loss account submitted to the appropriate Registrar in terms of clause (vi) hereof.

* NOTIFICATION NO SRO 3216, DATED 4-10-1957

Notification 2

In exercise of the powers conferred by the proviso to sub-section (1) of section 594 of the Companies Act, 1956 (1 of 1956) (hereinafter referred to as "the Act"), and in partial modification of the notification of the Government of India in the Ministry of Finance (Department of company Law Administration SRO No. 3216, dated 4-10-1957, the Central Government hereby directs that the requirements of clause (d) of sub-section (1) of the said section shall apply to a foreign company which is a shipping or airlines company (hereinafter referred to as "the company"), subject to the following exceptions and modifications, namely :--

1. It shall be deemed sufficient compliance of the provisions of clause (a) of sub-section (1) of the said section 594 if, in respect of the period ending on or after the 31st day of December, 1956, a company submits to the appropriate Registrar of Companies in India in triplicate--

i) a copy of the authenticated balance sheet and profit and loss account (including documents relating to every subsidiary of the company) as submitted by it to the prescribed authority in the country of its incorporation under the provisions of the law in that country; and

ii) a copy of the balance sheet and profit and loss account referred to in item (i) above, prepared in accordance with the provisions of Schedule VI to the Act, subject to the following further modifications:

a) any information or particulars not required to be disclosed in the accounts prepared in the country of incorporation by virtue of any special statutes or orders in that behalf such as, the Companies (Shipping companies) Exemption Orders, 1948) of the United Kingdom, need not be disclosed;

b) instead of the gross earnings together with all the relative operating costs chargeable thereat, only the net earnings shall be shown;

c) debts remaining unrealised after a period of three months need not be shown separately under the heading "Loans and advances" as required under (o) to part I of Schedule VI to the Act.

d) details classifying secured and unsecured loans and debts need not be shown except in respect of debts or loans from or to a body corporate in India, which information shall be disclosed by a note;

e) the list and other particulars required to be annexed to the balance sheet under section 372(9) of the Act need be only in respect of body corporate incorporated in India as are deemed to be in the same group as the company.

f) disclosure required in note (i) to Part 1 of Schedule VI to the Act of amounts due from other companies under the same management need be only in respect of such dues from companies registered under the Act as are deemed to be under the same management;

g) details under "current liabilities and provisions" need not be disclosed to the extent of the exemption given in item (a) above; and

h) sub-divisions of cash and bank balances need not be shown in detail except that the amount relating to the Indian branch shall be indicated by a note.

2. It shall be deemed to be sufficient compliance of the provisions of clause (a) of section 594(1) if the balance sheet and profit and loss account as referred to in part (ii) above, if they are not certified by auditors appointed in the manner laid down in the Act, are audited by the auditors of the foreign company appointed at the annual general meeting in the country of its incorporation.

3. Notwithstanding anything contained in the above paragraph, the company shall, if so required by notice in writing from the Central Government, furnish to the Central Government such information with regard to its accounts as the Central Government may require.

* NOTIFICATION NO.GSR 59, DATED 6-1-1959.