Delay in Cabinet decision on ‘control’ helps deal

With the Cabinet yet to approve the revised definition of ‘control’ in the Foreign Direct Investment policy, the proposed Jet-Etihad deal may scrape through based on the existing ‘liberal’ definition.

If Jet’s proposal to sell 24 per cent stake to Etihad gets the Foreign Investment Promotion Board (FIPB) nod before the revised definition is made effective, the tighter rules will not apply to the pact, an Industry Department official told Business Line .

“The deal will be scrutinised by the FIPB as per the existing definition of control on that day,” the official said.

The FIPB, which is scheduled to take up on Monday Jet’s proposal based on the revised shareholder agreement, could take a more lenient view on the matter if it follows the existing definition of control. Interestingly, the Cabinet was scheduled to take up the revised definition of control proposed by the Industry Department early this week, but the meeting got postponed.

The existing definition 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.

The revised definition, in sync with those in the Companies Bill and the SEBI takeover code, incorporates control exercisable through management and policy decisions, management rights, and shareholder agreements of an Indian entity.

SEBI and the Corporate Affairs Ministry had insisted that Jet’s revised shareholder agreement and corporate cooperation pact ensure control does not pass on to Etihad.

amiti.sen@thehindu.co.in

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