Cabinet may take final call on 'control' definition this week



New Delhi: The government is likely to take a final call on the definition of "control" in mergers and acquisitions, especially those involving foreign companies, amid uncertainties over the Rs 2,058 crore Jet-Etihad deal.

"The Cabinet is likely to take up the issues related to definition of 'control' on Wednesday or Thursday," a senior Commerce & Industry official said.

The Jet-Etihad deal, the largest in the Indian aviation sector that would see Abu Dhabi-based carrier buying 24 per cent in the domestic airlines, has hit regulatory hurdles mainly due to issues of "control and ownership" post the transaction.

According to the official, the new definition of "control" would be mostly in line with that proposed in the new Companies Bill.

As per the Companies Bill, which is awaiting Rajya Sabha approval, "control" shall include the right to appoint majority of the directors or to control the management or policy decisions exercisable by a person or persons acting individually or in concert, directly or indirectly. This right could be exercised by virtue of their shareholding or management rights or shareholders agreements or voting agreements or in any other manner.

Under FDI policy, 'control' rests with the one who has the power to appoint majority of its directors in a company. The review of control definition comes against the backdrop of ambiguities in many deals such as Jet-Etihad that involves foreign entities.

Last month, the Foreign Investment Promotion Board (FIPB) had deferred a decision on Jet-Etihad proposal on grounds of 'substantive ownership' and 'effective control'.

PTI