To accelerate inflow of FDI in
India and further simplify the techniques employed in
calculation of FDI, Government of India (GOI) is likely to
propose a Bill governing indirect shareholdings of foreign
investors in Indian companies.
The issue of calculating such
indirect shareholding came to the fore recently when
Vodafone's USD 11.1 billion buy out of Hutchison Telecom
International's direct majority holding in Hutchison-Essar
was examined by the FIPB to determine whether the multi layered
shareholding structure in Hutchison-Essar breached the FDI
ceiling in the telecom sector. The transaction was subsequently
cleared by the FIPB, after prolonged deliberation and seeking
the opinion of the Law Ministry and the FIPB called for a
review of the existing norms to bring about clarity in
computation of indirect shareholding of foreign investors.
The proposed Bill is expected to
consolidate and incorporate relevant provisions of the Foreign
Exchange Management Act, 1999 (FEMA), Companies Act, 1956 and
the FDI policy, various Press Notes issued by the Ministry of
Commerce and Industry and consider the legal regulations/
structures of other countries concerning indirect
Further, it is anticipated that
complex transactions would be dealt with in the Bill, thus
restraining companies from taking advantage of loopholes in the
present legislation and circumventing notified sectoral
In continuation of the ongoing
amendments being implemented in the FDI policy, GOI is
examining a proposal that seeks to make it obligatory for
foreign investors to file declarations as regards their
'beneficial ownership' in Indian ventures.
In the event the proposal is
implemented, in sectors where FDI is restricted, the overseas
investors would be required to declare to the government their
indirect stake holding, for which funds have been made
available through loans or other means.
With the introduction of such a
provision in the FDI policy, every foreign company investing in
India through an entity in another country would be required to
give a declaration in this respect.
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The Ministry of Corporate Affairs notified on June 5, 2015 that certain provisions of the Companies Act, 2013 shall not apply to private limited companies or shall apply with such exceptions or modifications as directed in the notification.
Whilst trade and barter have existed since early times, the modern practice of forming business relationships through the means of contract has come into existence only since the industrial revolution in the West.
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