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Indian govt issues definition of 'Group Company' for FDI
Jun '13
The Department of Industrial Policy and Promotion (DIPP), under the Ministry of Commerce & Industry, has issued a notification on definition of ‘Group Company’ in the Foreign Direct Investment (FDI) Policy.
“Group Company” means two or more enterprises which, directly or indirectly, are in a position to (i) exercise 26 percent, or more of voting rights in other enterprise; or (ii) appoint more than 50 percent, of members of board of directors, in the other enterprise, the statement said.
The new definition has come into immediate effect and has been incorporated in the FDI Policy contained in ‘Circular I of 2013 – Consolidated FDI Policy’, that became effective from April 5, 2013.
The new definition is expected to check foreign wholesale companies from selling more than 25 percent of goods to their affiliated firms.
The DIPP notification has come in the wake of clarification sought by US retail giant Walmart and its Indian partner Bharti Enterprises after questions were raised over amount of sales made by Bharti-Walmart (50:50 joint venture) to Bharti Retail, a wholly-owned subsidiary of the Bharti Enterprises.
In 2010, the DIPP had put a 25 percent cap on cash-and-carry firms for selling goods to ‘group companies’, as FDI in retail segment was not allowed then.

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