India May Widen Foreign Investment Definition

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The finance ministry is considering widening the range of investments that are foreign to contain devices that give voting rights to foreign investors.

Under the new FDI policy, a business qualifies as a local business if it’s less than 50 percent foreign investments and has Indian managers as a bulk resident. If the FDI definition revision is approved to contain such bonds as above, foreign holding computations in businesses may increase and lead them to be regarded as a foreign company rather than a local one.

Equity devices, like convertible bonds with a maturity of 10 or more years, are called convertible debentures and permit voting rights for foreign investors to use influence on an organization.

“There’s a need to fine tune the definition of management so that there’s more clarity on the issue. The government must take a look at problems of possible voting rights and instruments that give this choice to investors,” a government official told The Economic Times.

“This should reflect when possession or control is created in an organization,” the official added. An organization that’s labeled as a foreign business is subject to stricter rules following the new FDI policy. FDI rules prohibit foreign firms from entering sensitive sectors like multi-brand retail.