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India regulator firms 'corporate group' definition amid offshore funds scrutiny

Mumbai, September 21, 2023

India's market regulator will consider a listed company's major shareholders, affiliates and connected entities as part of a 'corporate group' as it increases scrutiny of investments by offshore funds in domestic entities, according to a written communication reviewed by Reuters.

This communication was sent by stock exchanges on behalf of the regulator - the Securities and Exchange Board of India (SEBI) - to companies earlier this week and has not been previously reported.

Currently, SEBI considers related parties as part of a corporate group. The expanded definition includes all subsidiaries, affiliate companies and related parties disclosed in annual reports or a company's website, the communication said.

SEBI did not respond to a Reuters email seeking comment.

The regulator had said in August that offshore funds with over 50% of their assets in a single Indian corporate group will need to disclose all its investors to custodian banks, through which funds flow into the country.

However, it had not defined "single corporate group" for the new disclosures, which have to be made within 90 days starting Nov. 1.

"This communication from SEBI is for the purpose of letting companies know what all could be construed as a group to determine the offshore fund holding in the corporate group," said Lalit Kumar, partner at law firm J Sagar Associates.

"It is quite exhaustive to give clarity on what all could be covered."

SEBI's latest communication further says that if a company's promoter, or promoter group, is also a major shareholder in another company, then that other company will be considered part of the same group, a person familiar with the matter said, declining to be named as he is not authorised to speak to the media.

Promoters is a term SEBI uses for large shareholders who can influence company policy. Its latest communication did not specify a shareholding threshold to be considered a major shareholder.

Considering two distinct entities to be part of a single group due to common shareholders could pose a challenge for large, family-led groups, said a corporate lawyer who declined to be named as he is not authorised to speak to the media.


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