Bidders to submit details of ultimate beneficial owners for security clearance

Bidders to submit details of ultimate beneficial owners for security clearance

New Delhi: Foreign and Indian bidders interested in buying government stake in state-owned firms such as BPCL, Air India and BEML, will have to disclose details of the ultimate beneficial owners to get a security clearance.

The Department of Investment and Public Asset Management (DIPAM) - the government agency managing the stake sale - has issued a proforma of the application for security clearance of the acquirers.

According to the proforma, any interest of more than 10 per cent in the bidding entity would require disclosures of parentage and beneficial ownership to get a security clearance.

In case the acquirer is a sole bidder, it has to share with the government details like nationality, address, parentage, Unique ID number of the country of residence and passport number, of its directors and partners.

Also details of the shareholders/ members of QIP (All companies/individuals holding more than 10 per cent share/10 per cent voting right /receiving more than 10 per cent of the distributable dividend/ otherwise exercise significant influence) have to be shared with the government while filling up the application form for security clearance.

The Qualified Interested Party (QIP), which is the highest bidder, have to submit a chart depicting the link between the QIP and the ultimate beneficial owners/ companies/ organisations along with their details in the application form.

If the QIP intends to form a Special Purpose Vehicle (SPV) after the financial bid, then details of jurisdiction in which the SPV is planned to be formed and details of the likely directors of such a SPV will have to be provided.

Also a self-declaration regarding the nature and extent of presence/ operation of QIP in China and Pakistan, if any would have to be provided by the QIP.

Where the QIP is a consortium, the name of all the members, percentage stake held, address and registration details of all the members would have to be submitted.

"Where a member of a consortium is a FUND, above details have to be submitted for the fund as well as for all persons who are in control of the fund, including the trustees and sponsors," said the application proforma.

In the case of 'Employee Bid', the employees are exempted from security clearance. However, the other consortium partners in the 'Employee Bid' have to obtain security clearance, it added.

Currently, strategic sale of BPCL and Air India is in the due diligence stage with the government receiving multiple bids for the two


In case of Air India, a group of 219 employees , along with a private financial institution have submitted an expression of interest (EoI) for the national carrier. For BPCL, a SPV floated by Vedanta and its London-based parent Vedanta Resources submitted an EoI.

The other two bidders are said to be global funds, one of them being Apollo Global Management.

As per DIPAM's guidance note framed in 2018 on strategic disinvestment, security clearance stage comes after financial bids are put in by investors.

The core group on disinvestment, headed by Cabinet Secretary, decides on a case to case basis whether security clearance is required for sale. In case it is required, the Administrative Ministry of the CPSE which is being sold shall approach the Security Committee on Strategic Disinvestment for the purpose for seeking requisite clearance.

Once the security report provides clearance to the bidder, the price bid is opened by the Evaluation Committee.

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