The Foreign Investment Promotion Board (FIPB) Monday cleared Jet Airways proposal to sell a 24 per cent stake to Abu Dhabis Etihad,making it the first deal after the government relaxed FDI rules for the sector last year.
We have approved the Jet-Etihad deal with some conditions, Economic Affairs Secretary Arvind Mayaram told reporters after a FIPB meeting. The conditions require the two companies to settle any dispute between them under Indian law instead of English common law as originally proposed. They also require obtaining prior FIPB approval for any change in the shareholding structure. Several changes were hanging fire since June as government departments had sought clarifications on the deal.
The approval was stuck at the FIPB amid moves to ascertain whether Jet would retain effective control,including retaining an Indian owner,and would not change its place of business. The revised agreement says all committees formed by the two airlines for administrative and operational functions would be advisory in nature. This includes a clause which said Etihad would source senior executives for Jet Airways. It has now been modified to read that Etihad can only recommend senior executives for appointment at Jet.
Etihad will now have two directors on the 12-member board,with Jet getting four,giving the Indian promoters more authority. Board resolutions will also be passed by simple majority. Chairman Naresh Goyal will have veto and voting powers.