The Union Cabinet will on Thursday take up a proposal by the Commerce and Industry Ministry to change the definition of control of a company in the foreign direct investment (FDI) policy to bring it in tune with the Companies Bill, pending before Parliament and the SEBI takeover code.

The existing definition of ‘control’ states that a company is 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. However, the revised definition includes control exercisable through management and policy decisions, management rights, and shareholder agreements of an Indian entity.

With the government looking to redefine FDI and portfolio investment as part of its overhaul of the foreign investment regime, a clear definition of control was identified as a step towards the big reforms.

The Companies Bill, yet to be passed by Parliament, defines 'control' as the right to appoint majority of the directors or to control the management or policy decisions exercisable by a person or persons acting individually or in concert, directly or indirectly, including by virtue of their shareholding or management rights or shareholders agreements or voting agreements or in any other manner.

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