Companies Act Section 386

Companies Act, Section 386: Interpretation of Key Expressions Relating to Foreign Companies

Section 386 of the Companies Act, 2013, provides important definitions and interpretative clarifications for the purpose of applying the provisions of the Chapter relating to foreign companies. Since the Chapter contains several compliance obligations for foreign companies operating in India, it is essential to precisely define certain expressions to avoid ambiguity in interpretation.

This section clarifies the meaning of three specific expressions, “certified,” “director,” and “place of business,” which frequently occur in the provisions of the Act concerning foreign companies. The expanded explanations are given below:

(a) Meaning of “Certified”

The expression “certified” refers to a document that is authenticated in the prescribed manner as being a true copy of the original document, or, in the case of a document in a foreign language, a correct translation.

For example, when a foreign company files its constitutional documents such as its charter, statutes, or memorandum and articles of association with the Registrar of Companies in India, these documents must be “certified.”
If the original document is in a language other than English, the law requires a translation into English, duly certified as correct.
The prescribed manner of certification is laid down under the rules made pursuant to the Act, ensuring uniform standards of authenticity.
This provision ensures that the Registrar and Indian authorities receive genuine, reliable, and accurate documents from foreign companies, which can be used for regulatory and legal purposes without risk of misrepresentation.

(b) Meaning of “Director” in Relation to a Foreign Company

The term “director”, when used in the context of a foreign company, has a broader meaning than in the case of an Indian company. It includes not only the individuals formally appointed as directors but also any person in accordance with whose directions or instructions the Board of Directors of the company is accustomed to act.

This expanded definition is designed to capture situations where shadow directors or influential persons exercise control over the Board without being formally appointed as directors.
Such persons may exert control indirectly, by issuing instructions or guiding the decisions of the Board. Even though they may not hold an official designation, the law treats them as “directors” for the purposes of accountability and compliance.
This prevents foreign companies from evading responsibility by appointing figurehead directors while allowing actual decision-makers to remain hidden from scrutiny.
In short, the law emphasizes substance over form, ensuring that the individuals who actually control the foreign company’s Indian operations fall within the scope of regulatory oversight.

(c) Meaning of “Place of Business”

The expression “place of business” in relation to a foreign company is given an inclusive definition. It is not restricted merely to a physical office or branch but specifically includes a share transfer or registration office.

This means that even if a foreign company does not maintain a full-fledged office in India, the mere existence of a facility or arrangement in India where shares are transferred or registered will amount to a “place of business.”
As a result, the company will fall within the ambit of Indian company law provisions applicable to foreign companies.
This clarification ensures that foreign companies cannot bypass compliance obligations by claiming that they do not have a conventional office in India. The law captures any kind of business presence, including those connected with the administration of securities or investor relations.