India's market regulator is set to enhance its scrutiny of investments by offshore funds in domestic companies by considering a more comprehensive definition of a 'corporate group.' According to a recent communication reviewed by Reuters, the Securities and Exchange Board of India (SEBI) will now include a listed company's major shareholders, affiliates, and connected entities as part of this corporate group. This expanded definition encompasses all subsidiaries, affiliate companies, and related parties disclosed in annual reports or a company's website.
The communication was relayed to companies by stock exchanges on behalf of SEBI. While SEBI has not responded to a Reuters email seeking comment, the regulator had previously announced in August that offshore funds with over 50 percent of their assets in a single Indian corporate group would be required to disclose all their investors to custodian banks. However, the definition of a "single corporate group" has not been clearly defined until now.
SEBI's latest communication also suggests that if a company's promoter or promoter group is a major shareholder in another company, then that other company will be considered part of the same group. Notably, the communication does not specify a specific shareholding threshold for being considered a major shareholder.
This broader definition of a corporate group may pose challenges for large, family-led business groups, as it could potentially categorize distinct entities as part of a single group due to common shareholders.
