Companies Act Section 376

Companies Act, Section 376: Power to Wind Up Foreign Companies, Even After Dissolution

Section 376 of the Companies Act, 2013, deals with the power of Indian authorities to initiate winding-up proceedings against a foreign company that was operating in India but has ceased its business activities in the country. This provision holds even if the foreign company has already been dissolved or otherwise ceased to exist under the laws of its home jurisdiction.

The section ensures that such foreign entities, even though incorporated outside India, do not escape winding-up liabilities or obligations simply by ceasing operations in India or being dissolved abroad. It provides a mechanism for winding up such foreign companies as unregistered companies under Indian law.

Key Provision:

If a foreign body corporate (i.e., a company incorporated outside India) has been carrying on business in India, and Subsequently ceases to carry on such business within the territory of India, then Such a body corporate may be wound up in India as an unregistered company, under the applicable provisions of Part of Chapter XXI of the Companies Act, 2013.
This can happen even if the company has already been dissolved or otherwise ceased to exist as per the legal framework or company law of the country in which it was originally incorporated.

Purpose and Legislative Intent

The primary objective of this provision is to ensure accountability of foreign business entities that have engaged in commercial operations in India. It prevents such companies from evading obligations (such as payments to creditors, tax dues, or statutory filings) by winding themselves up in their home country while leaving behind unresolved issues in India.

This provision enables Indian stakeholders such as creditors, regulators, or other affected parties to initiate winding-up proceedings, thereby:

Protecting the interests of Indian creditors, preserving and recovering any remaining assets located in India, and ensuring fair settlement of claims and liabilities, even in the absence of the company’s legal existence abroad.
Scope of Application

Applies to foreign companies that were operational in India but have since stopped carrying on business here. Such companies may have:
Voluntarily wound up under the law of their home country, been struck off or dissolved by operation of foreign law, or ceased to exist for any other legal or procedural reason.
Despite such dissolution or non-existence outside India, if they had a presence in India, they may be subject to winding up under Indian law as if they were an unregistered company under Section 375 and related provisions.

Legal Effect

This section overrides the company’s dissolution status in its home jurisdiction for the purposes of winding up under Indian law.
It ensures that the Indian Tribunal may take cognizance of the business activities and liabilities arising in India, regardless of the entity’s status abroad.
The Tribunal may exercise full powers under the Companies Act provisions applicable to winding up of unregistered companies.