MCA eases the path for foreign firms raising money in Gift-City

KR Srivats New Delhi | Updated on August 07, 2021

The Gift City, although a part of India, is technically an offshore territory forming part of a special economic zone   -  REUTERS

In a move that is expected to open the floodgates, they are now allowed to raise capital without filing a prospectus with the RoC in India

The Corporate Affairs Ministry (MCA) has now taken another big step in making the Gujarat-based Gift City, the country’s sole international financial services centre (IFSC), attractive for foreign companies to raise capital and list securities.

It has now allowed foreign companies to raise capital from the IFSC by freeing them from compliance requirements that are otherwise applicable under the Indian company law.

Foreign companies issuing securities in Gift City — even if they do it through the electronic mode without having a place of business in India — need not henceforth file any prospectus with the Registrar of Companies based in India, say company law experts.

Set of relaxations

This latest set of relaxations by the MCA comes on the heels of the Gift-City regulator International Financial Services Centres Authority (IFSCA) coming out with a comprehensive listing framework to enable Indian and foreign issuers and those in IFSC to issue and list securities in Gift City IFSC.

With this framework, the floodgates for primary market issuances by foreign companies are now open in Gift City, say experts and capital market intermediaries.

The Gift City, although a part of India, is technically an offshore territory forming part of a special economic zone.

V Balasubramaniam, MD & CEO, India INX, which is BSE’s international arm, said the latest MCA move is very well-timed.

“With these amendments notified in the Companies Act, and combined with capital gains tax exemption to non- residents, companies and issuers from India and the region can now look at India INX as a primary listing platform to attract and raise international capital,” he told BusinessLine.

Aseem Chawla, Managing Partner, ASC Legal, said these measures are part of the ongoing process of making the IFSC Gift City a competitive international hub that attracts large doses of foreign capital.

Atul Pandey, Partner, Khaitan & Co, said that latest amendments are in tandem with government’s idea of making IFSC more attractive for foreign investors.

“They aim to ease the regime applicable to foreign companies or entities operating in IFSC and allow them to raise capital easily by carving them out of the general company law applicable to foreign companies,” he said.

Tushar Sachade, Partner, Price Waterhouse & Co LLP, said, “In order to promote offering of subscription or listing of securities and IDRs of foreign companies in the IFSC, the Central government has exempted such foreign companies from various procedural aspects of Companies Act 2013 such as maintaining accounts in India, dating and registration of prospectus, and all other matters incidental to the same. This is a welcome move and will encourage ease of doing business of such foreign companies who wish to raise monies from the IFSC stock exchanges.”

Through this amendment, the government has now extended exemption to foreign companies raising money vide public offering in IFSC, from complying with certain compliances otherwise prescribed for raising public money which, inter alia, include issue and registration of prospectus in India, said Harish Kumar, Partner, L&L Partners.

Published on August 07, 2021

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