Government New Rule: China & Pakistan based companies must present ownership plan

Tougher rules for Chinese and Pakistan based companies bidding for contracts in India

Wednesday, 21st October 2020

From the names of the directors as well as their nationalities to a specific graph denoting the ownership framework, the Centre is likely to demand all such info from the various Chinese as well as Pakistan-based companies in case they wish to prove their eligibility for the various PSU and government contracts. Besides, the details pertaining to all the entities with more than 10% shareholding need to be presented.

This move follows just 3 months after the decision of the government to impose and implement security screening on the companies from the countries that share border with India.

The guidelines presented last week is likely to pave the way for security clearance with regard to contracts, which may range from transporting things like laptops and mobile phones to more advanced equipment and raw materials for constructing tunnels and roads throughout the country.

The governmental strategy will not only impact the likes of organizations like China Light and Power, that are involved in handling power projects in India, and the road building firms, but also companies like Oppo and Xiaomi that often bid for phone supplying contracts.

After reviewing the data presented by these companies, a panel consisting of DPIIT and key security officials will bear the responsibility of clearing these entities’ entry into the public contract market of India. Unlike the FDI, where the rules and regulations are being debated still, in case of the governmental contracts, it is the Centre’s decision to fix a threshold of 10% for determining whether a particular Chinese company comes with “controlling stake” or no such stake.

In case a foreign company undergoes some kind of alteration in its holding pattern, the company will have to inform the government of the same. In fact, all details pertaining to beneficial ownership must be shared if the threshold in question is beyond 10%.

Source: Times of India