Earlier yesterday, the Prime Minister of India announced (Announcement)  a number of key changes to India’s foreign direct investment (FDI) policy, as set forth in Consolidated FDI Policy Circular of June 7, 2016 (Policy). Broadly, these changes pertain to enhancing the limits of foreign investment (FI) and easing of existing conditions regarding FI in some sectors. Through this short update post, we seek to highlight some prominent changes thus announced.
Partner in the General Corporate Practice at the Mumbai office of Cyril Amarchand Mangaldas. Anshuman specializes in corporate advisory matters. He can be reached at email@example.com
Over the last few years, there has been considerable debate in Indian corporate legal circles around the interpretation of the term ‘control’ as defined under the SEBI (SAST) Regulations, 2011 ( “Regulations”). To those unaware of this issue, the question, simply put, is this: if an investor seeks to invest in an Indian listed entity (“Target”) and as a part of its investment terms requests for and obtains, certain contractual rights that are not available to other shareholders of the Targets (“Special Rights”), would such Special Rights amount to acquisition of ‘control’ of the Target by the investor for the purposes of the Regulations? The genesis of such debate may owe its origins to conflicting definitions of ‘control’ by Indian courts and legislators or interpretations of ‘control’ by Indian regulators but that would not be the focus of the current post. Nonetheless, there is no exhaustive definition of ‘control’ and recognising its impact on deal making and M&A in the public space in India, India’s securities markets regulator, the Securities and Exchange Board of India (“SEBI”) in March of 2016 initiated the process to define ‘control’ by proposing certain bright line tests (“BLTs”).