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Franchisors opting to take shares in their Indian Developers can provide their views to the Government

03/02/2011

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United Kingdom

Franchisors opting to take shares in their Indian Developers can provide their views to the Government

The Regulatory terrain in India is currently in a state of flux. Policy is being regularly updated and changed. This is causing substantial confusion amongst franchisors considering entering the Indian market.

The Ministry of Commerce & Industry of the Government of India issued a Circular dated 14th January 2011 inviting comments from any interested party in relation to India's foreign direct investment (FDI) policy before they issue their next Circular in March 2011. Foreign direct investment involves holding of shares by a foreign party in an Indian company. Franchisors entering India frequently do take shares in their Developer.

The current Consolidated FDI policy of October 1, 2010 of the Department of Industrial Policy and Promotion of the Ministry of Commerce supersedes all previous policy statements but this will in turn be superseded by the anticipated March Circular. 

There are currently restrictions on holding shares in Indian companies in retail involving products, but not in relation to hotels and certain types of restaurants.

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