The Centre has taken the next big step towards deepening of corporate bond market by changing the definition of “listed companies” and conferred compliance relief to unlisted, closely-held, public and private companies that had listed their debt securities on private placement basis.
The Corporate Affairs Ministry (MCA) has now ruled that such companies — earlier categorised as listed companies although their equity capital was not listed — will henceforth not be treated as “listed companies” under the Indian company law.
This would mean that such companies would henceforth not be treated in the same footing as the other equity listed companies in respect of compliances under company law and SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015, which are otherwise applicable for all listed entities.
This rule change is going to prompt more unlisted private companies to issue non-convertible debt and get these securities listed in the bourses without the company concerned having to face larger compliance requirements applicable to listed companies. Such a move would help deepen the corporate debt market and enable ease of doing business, corporate observers said.
This new dispensation will be also applicable for public companies whose securities are listed abroad in a permitted jurisdiction without having their equity shares listed in domestic bourses, the MCA has said.
This would mean lower compliance burden for those Indian public companies that have their securities listed abroad without listing their equity shares in local bourses as they will no longer be treated as “listed companies” for Indian company law purposes.
Experts’ take
Raj Bhalla, Partner, MV Kini & Co, said this shift is significant in so far as unlisted companies that issue certain category of their securities, on private placement basis and list such securities on a recognised stock exchange shall no longer be deemed to be listed companies and expected to comply with the elaborate compliances under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.
Harish Kumar, Partner, L&L Partners, said this relaxed criteria for a listed company, a long awaited industry ask, would give needed compliance relief to those private and closely held public companies which have got only non-convertible debentures/redeemable preference shares listed and currently being treated on the same footing as other equity listed companies for the purpose of compliance.
Praveen Raju, Partner, Spice Route Legal, said that the earlier rigour of compliance for companies with only listed debt securities or preference shares has effectively been taken away. This should attract more private companies to raise listed debt without the apprehension of a very high compliance cost. Raju said.