CCEA revises definition of 'control' for FDI in India

02 Aug '13

1 min read

The Cabinet Committee on Economic Affairs (CCEA) has reviewed the definition of the term ‘control’, for calculation of total foreign investment i.e. direct and indirect foreign investment in Indian companies.

The CCEA has approved the proposal of the Department of Industrial Policy & Promotion (DIPP) for amendment to the existing definition of ‘control’ under the FDI policy.

As per the revised definition, ‘Control’ shall include the right to appoint a majority of the directors or to control the management or policy decisions including by virtue of their shareholding or management rights or shareholders agreements or voting agreements.

Until now, the definition of ‘control’, in the extant FDI policy was: “A company is considered as ‘controlled’ by resident Indian citizens if the resident Indian citizens and Indian companies, which are owned and controlled by resident Indian citizens, have the power to appoint a majority of its directors in that company.”

The revised definition of ‘control’ will expand the definition of ‘control’ to cover ‘control’ exercisable inter-alia through management and policy decisions, shareholding, management rights, shareholder agreements and ensure alignment with the definition as per the Substantial Acquisition of Shares and Takeovers (SAST) Regulations, 2011 and the definition proposed in the Companies Bill, 2012.

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