Companies operating in broadcasting and defence production sectors may soon be able to appoint a non-resident Indian (NRIs) as a director if a proposal currently under consideration is accepted by the government. The move aims to provide “equal opportunity” to all Indians, resident or non-resident, in top-level appointments of sectors where government has allowed limited entry of foreign direct investors. In sectors where 100% FDI is allowed, no such restrictions exist.
The move is also in line with the new Companies Bill, 2012, which allows the appointment of NRI directors subject to the rider that one such director on the board will have to spend at least 182 days in the country.
The Department of Industrial Policy and Promotion (DIPP) doesn’t allow the inclusion of a NRI or an overseas Indian on the board of companies operating in the broadcasting and defence sectors due to security concerns. Sources said that DIPP is now seeking a review of this restriction and has also told the Mayaram committee on `rationalising the definition of FDI and FII’ that NRI s are Indian citizens and there is a strong case for opening this (director-level appointments of NRIs) for them.
The government has already taken forward steps to implement the changes and is in the final stages of reviewing and amending the Overseas Citizen of India Act (OCI Act) to allow NRIs and overseas Indians an equal opportunity to become a director in print, broadcast, DTH, defence productions, defence joint venture companies subject to adequate safeguards, sources said.
Comments have been sought from various ministries, including the ministry of corporate affairs, information and broadcasting, home and defence.
As per the current consolidated FDI policy pertaining to the broadcasting and defence sectors, only “resident Indian citizens” are permitted to hold all key managerial positions including director, CEO, CFO, MD. And the definition of “resident Indian citizen” has to be interpreted in line with the definition of “person resident in India” as per FEMA, 1999, read in conjunction with the Indian Citizenship Act, 1955, the existing policy said.
“Allowing NRI directors is expected to facilitate investment in broadcast and defence sectors as investors are more comfortable to work with people who they know,” said a DIPP official.
Government wants to give a fillip to NRIs as they constitute a sizeable portion of investors in India. There are about 25 millions NRIs globally and government feels that there is ample opportunity to get investment from this community. Apart from directorial position, the finance ministry is also looking at bringing NRIs on par with other portfolio investors, allowing NRI individuals to invest up to 10% in any listed Indian companies instead of 5% allowed under the current norms. The thinking is also to increase aggregate cap of investment by NRIs from 10% to 24% level, the same as that currently applicable for FIIs.
According to the new Companies Bill, 2012, which is passed in the Lok Sabha and pending the approval of the Rajya Sabha, “Every company shall have at least one director who has stayed in India for a total period of not less than 182 days, in the previous calendar year.” The changes could permit NRIs to escape the resident clause even while complying with other regulations.
