Q&A
How did the definition of ‘control’ get changed in India and how does it apply to their foreign direct investment (FDI) reforms?
How did the definition of ‘control’ get changed in India and how does it apply to their foreign direct investment (FDI) reforms?
The broadened definition of ‘control’ now includes not only the power to appoint a majority of directors, but also the ability to control the management or policy decisions via shareholding, management rights, shareholder agreements or voting agreements. The new definition of ‘control’ is also expected to apply to FDI in sectors where a sectorial cap currently exists. Indian citizens must exercise ‘control’ under all limbs of this new definition for a company to be considered domestically ‘controlled’.
Consequently, companies previously considered to be ‘Indian’ may now be viewed as foreign controlled and subject to FDI caps and other restrictions on downstream investment.
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