ABC Inc., a company based in USA, develops cyber security software and sells it to its Indian clients. ABC Inc. has entered into service agreement…

(a) As per Section 2 (42) of the Companies Act, 2013, “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. Applicability of Act to Foreign Companies: Sections 380 to 386 (both inclusive) and Sections 392 and 393 of the Companies Act, 2013 (the Act) shall apply to all foreign companies. It implies that all companies which falls within the definition of foreign company as per Section 2 (42) , shall comply with the provisions of this Chapter. Requirement of holding of paid-up share capital: As per Section 379 (2) of the Act, where not less than 50% of the paid-up share capital, whether equity or preference or partly equity and partly preference, of a foreign company incorporated outside India is held by: (i) one or more citizens of India; or (ii) by one or more companies or bodies corporate incorporated in India; or (iii) by one or more citizens of India and one or more companies or bodies corporate incorporated in India, whether singly or in the aggregate, such foreign company shall also comply with the provisions of Chapter XXII and such other prescribed provisions of the Act with regard to the business carried on by it in India as if it were a company incorporated in India. In the instant case, ABC Inc. will also be required to comply with the provisions of Chapter XXII as 50% of the shares of ABC Inc. are held by PQR Private Limited, a company incorporated in India.