The Reserve Bank of India, on Thursday, notified foreign direct investment (FDI) guidelines, defining control of a company. The notification of Press Note 2 and 3 of the Department of Industrial Policy and Promotion (DIPP), which has been pending for the last four years, will be used to ensure that foreign direct investments comply with FDI ceilings and other norms.
As per the press notes, a company is considered as ‘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. On the other hand, a company is considered as ‘owned’ by resident Indians if more than 50 per cent of the equity is held by the entities in India. Similarly, it would be a foreign company, if over 50 per cent of the equity is held by a non-resident.
