In a move to enhance the overseas investment into the country, the government has notified changes in the Foreign Direct Investment (FDI) policy, widening the definition of the term 'control' for mergers and acquisitions involving overseas companies, a move that will provide more clarity to foreign investors and would also prevent backdoor entry of foreign companies in the prohibited sectors. The notification will have to be tabled in Parliament within 30 days of the commencement of the next session.
As per the revised FDI guidelines, the government had relaxed norms for multi-brand retail trading and eased the mandatory 30 per cent local sourcing norms for companies. The government is of the view that the move will help to enhance the FDI into the country. Meanwhile, FDI increased to $9 billion in April-June quarter from $5 billion in the same period of FY13.The foreign direct investment (FDI) policy is now notified under FEMA regulations and is effective from August 22.
The new definition of control will include the right to appoint majority of directors and will also be expanded to include control over the management or policy decisions, instead of just the right to appoint majority of the shareholders. Presently, a company is said to be controlled by an Indian resident if the Indian investor holds more than 51% stake and can appoint the majority directors in the firm. As per the new guidelines, an Indian company will be considered a foreign entity if the major stake in the firm is held by foreign investors or is foreign controlled and any investment by such a company will also be considered as foreign investment.
As per the revised FDI guidelines, the government had relaxed norms for multi-brand retail trading and eased the mandatory 30 per cent local sourcing norms for companies. The government is of the view that the move will help to enhance the FDI into the country. Meanwhile, FDI increased to $9 billion in April-June quarter from $5 billion in the same period of FY13.The foreign direct investment (FDI) policy is now notified under FEMA regulations and is effective from August 22.
The new definition of control will include the right to appoint majority of directors and will also be expanded to include control over the management or policy decisions, instead of just the right to appoint majority of the shareholders. Presently, a company is said to be controlled by an Indian resident if the Indian investor holds more than 51% stake and can appoint the majority directors in the firm. As per the new guidelines, an Indian company will be considered a foreign entity if the major stake in the firm is held by foreign investors or is foreign controlled and any investment by such a company will also be considered as foreign investment.
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