Government to set 25% floor for JV partners in FDI

Source: The Financial Express, April 08, 2012

New Delhi: The government is likely to define the term ‘joint venture’ for the purpose of foreign direct investment (FDI), under which it would be mandatory for at least two partners to have minimum 25% stake each in the JV company.

The definition of ‘joint venture’ will be incorporated into the consolidated FDI policy, which is to be unveiled shortly.

“We have decided to define the joint venture under which at least two partners should have a minimum 25% stake each. Till now, there was no specific shareholding mentioned in the FDI policy to define joint venture,” an official source said.

The official said that lack of any prescribed definition for joint venture was leading to cases where companies were entering into partnership without any minimum prescribed investment limit and, then, terming it as a joint venture. The policy, which was originally scheduled to be unveiled on March 30, was held up as the then department of industrial policy and promotion (DIPP) secretary PK Chaudhery was appointed as Haryana chief secretary and the new incumbent is yet to take charge.

“The new definition will be included into the FDI policy. As and when the new secretary takes over in DIPP, the policy will be released,” added the official.

The government in 2010 had decided to come out with a consolidated FDI policy paper summarizing all the regulations, including those of Fema and Reserve Bank of India (RBI), for the benefit of foreign investors. It revises the policy every six months.

The department had last released the consolidated FDI policy on September 30, 2011, in which the conditions for FDI in respect of construction of old-age homes and educational institutions were eased.

For April-January 2011-12, FDI went up by 53% to $26.19 billion from $17 billion in the corresponding period last year.

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