11 Sep :The Union Cabinet today gave its approval to authorize Ministry of Information & Broadcasting to grant permission to the FM broadcasting companies for creation of subsidiaries, merger / demerger/amalgamations of companies by way of transfer of shares in relaxation of FM Phase II Policy, which would be modified as under :
No permission holder, whether with or without foreign investment, shall be permitted to change the ownership pattern of the company through transfer of shares of the majority shareholders / promoters to any new shareholders without the written permission of the Ministry of Information & Broadcasting, which shall not be granted for a period of five years from the date of operationalization of the channel, subject to the condition that the new shareholders conform to all the prescribed eligibility criteria. However, requests for transfer of shares for the purpose of creation of a subsidiary company, amalgamation of companies of the same group, de-merger of company etc. would be allowed within the period of five years also subject to the fulfillment of the following conditions :-
a) The majority shareholders / promoters would continue to remain as majority shareholders / promoters and together should hold at least 51% of the total shares.
b) The new corporate entities would maintain their FDI component within the prescribed limit and would not violate the terms and conditions of the tender document and Grant of Permission Agreement
c) The new corporate entities should have minimum prescribed net worth and adhere to all the terms and conditions of the tender document and the provisions of the agreement.
d) The new company shall sign a fresh agreement with Government on identical terms and conditions ( except for transferability of shares as provided herein) for the remaining period of license of the original company.
e) Such transfer of shares would be permitted only once during the first five years period from the date of operationalization.
f) No new tax regime will be designated to provide any incentive to encourage creation of subsidiaries, merger / demerger, amalgamation of FM Broadcasting companies.
g) Any tax implication arising out of such mergers / demergers or amalgamation would be governed by the provisions of the Income Tax Act,1961 as applicable from time to time.
h) The processes / action taken by the licensee companies including for formation of new companies / subsidiaries / mergers / amalgamations and /or disinvestments of undertakings, or part thereof, of existing companies etc., need to be compliant with the companies Act, 1956. The applicant shall not dilute such requirement through its Articles of Association or any Agreement.
The private FM broadcasters are at present facing various difficulties. It would give them financial flexibility and hence the growth of the FM industry could be protected.