Sections 390 and 391 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Section 390 is an enabling provision. It lets the Central Government make rules for the offer of Indian Depository Receipts (IDRs) by a company incorporated or to be incorporated outside India. Section 391 then applies the prospectus-liability sections, and the closure-of-business provisions, to such offers.
Section 390 does not set out the IDR regime itself. It says that, notwithstanding any other law, the Central Government may make rules on four things: the offer of IDRs, disclosures in the prospectus or letter of offer, how IDRs are dealt with in depository mode, by custodians and by underwriters, and the manner of sale, transfer or transmission. Section 391(1) applies sections 34 to 36 to an IDR issue by a foreign company. Section 391(2) applies Chapter XX (winding up), subject to section 376, for closure of the Indian place of business where money raised has not been repaid or redeemed.
What section 390 covers
An IDR is a way for an overseas company to reach Indian investors without listing its own shares in India. Section 390 does not define an IDR or fix the terms of the offer. It gives the Central Government power to make rules, and it does so in these four areas.
| Clause | Subject of the rules |
|---|---|
| (a) | The offer of Indian Depository Receipts |
| (b) | The requirement of disclosures in the prospectus or letter of offer issued in connection with IDRs |
| (c) | The manner in which IDRs are dealt with in a depository mode and by custodians and underwriters |
| (d) | The manner of sale, transfer or transmission of IDRs |
The rules can apply to a company "incorporated or to be incorporated outside India, whether the company has or has not established, or will or will not establish, any place of business in India". So an overseas issuer with no Indian office can still be covered.
The opening words, "notwithstanding anything contained in any other law for the time being in force", mean the IDR rules made under section 390 prevail over any other law to the extent of any conflict. Because the detail sits in the rules, anyone considering an IDR issue must read the rules in force together with any regulatory framework that applies to securities offers. This article explains the Companies Act text only. For background on a related way to raise capital abroad, see global depository receipts.
If your group is exploring an offer into India, our legal consultation team can help you identify the provisions that apply.
Section 391(1): prospectus liability applies
Section 391(1) says sections 34 to 36 (both inclusive) apply to:
- the issue of a prospectus by a company incorporated outside India under section 389 as they apply to a prospectus issued by an Indian company; and
- the issue of Indian Depository Receipts by a foreign company.
Sections 34 to 36 deal with civil and criminal liability for misstatements in a prospectus and with fraudulent inducement. See sections 30 to 36: prospectus liability. So an overseas issuer that makes an IDR offer with a false or misleading prospectus faces the same liability provisions that an Indian company would.
Section 391(2): closure of the Indian place of business
Sub-section (2) was substituted by the Companies (Amendment) Act, 2017 with effect from 9 February 2018. It provides that, subject to section 376, Chapter XX applies mutatis mutandis to the closure of the place of business of a foreign company in India, as if it were an Indian company, if the foreign company has raised monies through an offer or issue of securities under this Chapter that have not been repaid or redeemed.
Section 376 is the provision that lets the Tribunal wind up a foreign company that has ceased to have a place of business in India, among other things; see winding up of unregistered companies: sections 375 to 377. The effect of section 391(2) is that a foreign company cannot simply shut its Indian office and walk away from IDR or other securities holders in India. Chapter XX's winding-up machinery applies as though it were an Indian company, so the holders' claims are taken into account. The practical detail of how this works for a particular IDR depends on the rules and the terms of the issue.
Why the section is short
The Companies Act uses section 390 as a door. The Act states the power, and the Central Government fills in the detail by rules, which can be changed faster than the Act. A reader should therefore look at three layers: the Act (sections 390 and 391), the rules made under section 390, and any applicable securities-market regulation. Do not rely on any summary, including this one, for the exact eligibility or disclosure terms.
Consequences of default
Section 392 applies to a contravention of the Chapter, which includes sections 390 and 391. The company is punishable with a fine of not less than one lakh rupees up to three lakh rupees, and an additional fine up to fifty thousand rupees per day after the first for a continuing contravention. Each officer in default is punishable with a fine of not less than twenty-five thousand rupees up to five lakh rupees. Note that section 392 is expressed to be "without prejudice to the provisions of section 391".
Need help with a cross-border securities offer?
An IDR offer raises questions under the Companies Act, the rules and securities regulation at once. If your group is weighing an offer into India, our legal consultation team can help you sort out which provisions apply before documents are drafted.
Key takeaways
- Section 390 is an enabling provision: the IDR detail is in rules.
- The rules cover the offer, disclosures, depository-mode dealing, custodians, underwriters and transfers.
- The overseas company need not have a place of business in India.
- Sections 34 to 36 apply to IDR issues by a foreign company (section 391(1)).
- Where securities money is unpaid, Chapter XX applies to closure of the Indian place of business (section 391(2)), subject to section 376.
- Breach is punishable under section 392.
Read next
- Prospectus of a foreign company: sections 386 to 389
- Penalties and validity of contracts for foreign companies: sections 392 and 393
- Sections 30 to 36: prospectus liability
- Global depository receipts
Disclaimer: Based on the Companies Act, 2013 as amended up to 1 April 2021 (official consolidated text), read with later developments noted in the article; proposals in the Corporate Laws (Amendment) Bill, 2026 are pending and not law as on 30 September 2026. Verify current notifications and rules before acting.