CII: Amend Note but protect stakeholders

Ficci for cooling off period of 5 yrs before JV exit

The Confederation of Indian Industry (CII) today said the government's move to amend Press Note 18 should be accompanied by a clause to protect the interest of shareholders.

"We are asking the government to introduce specific clauses so the share values do not dip if any foreign company takes individual investment decision unilaterally. And such clauses should be incorporated by the foreign companies as part of good corporate governance," N Srinivasan, director general, CII, told Business Standard.

"The government has laid strict guidelines for foreign institutional as well as direct investors. But the norms on strategic investment should be tweaked with clear guidelines on the non-competing clause, particularly for new JVs," he said.

CII sources added it may agree on a dilution in the provisions of Press Note 18 in cases where either the joint venture was not working out or where the stake of the foreign partner was too small to impact the operations of the JV.

The Federation of Indian Chambers of Commerce and Industry (Ficci), which met Commerce Minister Kamal Nath has suggested a cooling off period of five years to protect the interest of the Indian JV partners when the foreign companies plan to enter the same or allied business independently.

FICCI put forth two cases ""TVS-Suzuki and Hero Honda "" where settlements have been smooth between the Indian and foreign partners.

"Indian industry can use the templates in the JV agreements drafted in the US which will include a 'conflict of interest' clause with a cooling off period that prevents the technology provider from abandoning the receiving company. Also, this will prevent the exploitation of the brand name created by the JV," said Ficci President YK Modi.

Chamber buzz

CII

Value of Indian shareholders should be protected

A quick-dispute settlement mechanism should be in place

Non-competing clauses should be introduced if a partner decides to go solo

FICCI

Cooling off period of 5 years should be introduced