ANNOUNCEMENT 22 Aug 2013
The definition of control has been amended under the FDI policy with the effect of reducing the scope of companies that have access to sectors restricted to foreign investment.
NUMBER OF INTERVENTIONS
Press Note No. 4 (2013 series)
On 22 August 2013, through Press Note No. 4 the Ministry of Commerce and Industry amended the definition of the word "control" in the FDI policy. The FDI policy differentiates between "owning" and "controlling" a company and changes in either may have restrictions or require prior government approval. With the amendment, the government seeks to prevent indirect control by foreign investors.
With the previous regulation, a company was said to be "controlled" by Indians if an Indian citizen or company had the power to appoint the majority of the directors in that company.
With the amendment, "control" of a company will be determined on the basis of the right to appoint a majority of directors or to control the management or policy decisions including by virtue of the shareholding or management rights or shareholders agreements or voting agreements.
The scope of how control is defined has therefore been broadened to include other means of controlling an Indian company thus potentially increasing the number of FDI subject to screening.