Tuesday, July 16, 2013

DIPP moves to end control of companies via back door

The Department of Industrial Policy and Promotion (DIPP) has moved the much-awaited draft Cabinet note on expanding the definition of "control" for calculating foreign investment, direct and indirect, in an Indian company. The proposal, which has to be cleared by the Cabinet Committee on Economic Affairs (CCEA), has suggested the definition of "control" be expanded to include the control exercisable through management and policy decisions, management rights, and shareholder agreements of an Indian entity. Currently, a company is considered "controlled" by resident Indian citizens if the power to appoint a majority of the directors on its board is held by Indian companies and citizens. It was felt this definition was not comprehensive enough to cover all possible ways in which "control" was exercised in corporate entities.

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