The Corporate Affairs Ministry (MCA) on Tuesday implemented a key provision in the Company law that would allow certain Indian public companies to directly list certain specified securities in stock exchanges in foreign jurisdictions, including the Gift City in Gujarat.
The Government had in September 2020 amended the Companies Act 2013 to specify that certain class of Companies would be allowed to directly issue certain class of securities in foreign stock exchanges. Also the companies that would be allowed to go in for direct listing would be exempted from reporting of beneficial interest of shares and would not be required to comply with certain norms on public offer and kinds of equity shares that can be issued under Indian company law.
MCA on Tuesday specified through a notification that October 30 would be the day on which the concerned 2020 amendments in company law would come into effect.
This MCA move would mean that Government is expected to soon specify the class of securities and class of public companies that can go in for direct listing.
MCA and the Department of Economic Affairs (DEA) have in the last few months been working on the Rules that need to be framed for the purpose.
Currently, Indian companies can access overseas equity markets only through depository receipts or by listing their debt securities on foreign markets.
The Centre had in 2020 amended the Companies Act allowing the direct listing of Indian companies on foreign stock exchanges, but the framework has not been put in place so far.
The Finance and Corporate Affairs Minister Nirmala Sitharaman had recently said the government is currently focused on enabling direct listing of Indian companies in GIFT City before looking at allowing them to list directly overseas.
In July this year, Sitharaman had at a SEBI event in Mumbai said that government has decided to enable the direct listing of listed and unlisted companies on overseas exchanges at the IFSC.
The move will enable “start-ups and companies of like nature to access the global market through GIFT IFSC”, Sitharaman had then said. “This will also facilitate access to global capital and result in better valuation for Indian companies.”
Shrishail Kittad, Partner, IndiaLaw LLP says: “Allowing Indian companies to tap overseas market will help the companies to improve their valuation. It’s an alternative avenue for domestic companies to raise capital.
Manendra Singh, Partner, Economic Law Practice told BusinessLine on Tuesday that Government had introduced path breaking amendment in 2020 whereby it had introduced direct listing of shares by Indian public companies on offshore bourses. “Now this has been enforced by the Government from October 30 paving the way for Government to frame necessary rules in this regard and prescribe classes of companies, securities, exchanges, jurisdictions and relevant conditions to enable such listing”, he said.
The amendment had also allowed Government to give added benefits from compliance with various procedural requirements, hence expediting such listing, he added.
“It will also need to be seen if Government allows such listing in GIFT City or not. In any event, it’s going to be a welcome move for Indian companies to tap into offshore markets and offer its shares to larger foreign investors”, Singh said.
Manan Lahoty, Partner, Induslaw says “The big idea of allowing unlisted Indian companies to list overseas had gained momentum with the amendment made to the Companies Act in 2020. However, apart from notifying the amendment, detailed rules and corresponding alignment of other laws were expected. With this notification, the government has set the ball rolling. However, detailed rules will be needed before the first Indian company can use this route to list.”