A type of equity that can only be held by domestic residents. Foreign investors cannot hold restricted equity for many reasons and considerations including control over capital flow into certain sectors.
Restriction can either be full or partial: full restriction, as the name implies, completely prevents capital flows into a certain share of stock or equity holdings, while partial restriction allows foreign ownership but only up to a specific percentage of a firm’s equity. For example, restricted shares could be owned by foreigners, but total ownership will not exceed 50% of a firm’s equity capital.
In reality, ownership restrictions may be bypassed by establishing a type of trust fund which allows foreign investors to buy restricted equity through the trust.
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