The Cabinet Committee on Economic Affairs has approved the proposal of the Department of Industrial Policy & Promotion for amendment to the existing definition of "control" under the FDI policy. The revised definition will be as follows:

Until now, the definition of "control", in the extant FDI policy is as under: "A company is considered as "controlled" by resident Indian citizens if the resident Indian citizens and Indian companies, which are owned and controlled by resident Indian citizens, have the power to appoint a majority of its directors in that company".

The CCEA has now approved to define “control” as below:

" `Control` shall include the right to appoint a majority of the directors or to control the management or policy decisions including by virtue of their shareholding or management rights or shareholders agreements or voting agreements."

The revised definition of `control` will expand the definition of `control` to cover `control` exercisable inter-alia through management and policy decisions, shareholding, management rights, shareholder agreements and ensure alignment with the definition as per the Substantial Acquisition of Shares and Takeovers (SAST) Regulations, 2011 and the definition proposed in the Companies Bill, 2012.

Definition of control expanded to include management rights, shareholding and shareholder agreements, broadening foreign investment calculation. The FDI policy definition of control is expanded to include the right to appoint a majority of directors or to control management or policy decisions by virtue of shareholding, management rights, shareholders agreements or voting agreements, aligning the concept with takeover and company law approaches and capturing direct and indirect forms of influence for calculation of total foreign investment.