Government allows direct listing of securities by public Indian companies on Permitted Stock Exchange(s)

Introduction:

Pursuant to section 23(3) of the Companies Act, 2013, Ministry of Corporate Affairs (MCA) has the power to make rules for permitting certain public companies to list its securities on stock exchange(s) in certain foreign jurisdictions.

Key Points:

1) Eligible Companies:

• Unlisted Public Companies.
• Listing Public Companies, which are in accordance with rules, regulations or directions issued by SEBI or International Financial Services Centre Authority (Authority).

2) Provision:

• An eligible unlisted public company which does not have any partly paid shares may issue equity shares for the purpose of listing on India International Exchange, NSE International Exchange in permissible jurisdiction. Here issue include offer for sale of equity shares by its existing shareholders.
• Such unlisted public company shall file the prospectus in Form LEAP-1 within 7 days after the same is filed with such permitted stock exchange.
• Such eligible unlisted public company or its existing shareholders shall have to comply with the scheme made by Ministry of Finance for listing of equity shares of Indian companies on International Exchanges.
• Unlisted public company intended to get its securities listed on permitted stock exchange in permissible jurisdiction as well as on recognized stock exchange(s) in India shall also comply with conditions prescribed by SEBI.
• After the listing of equity shares mentioned in the rules, such unlisted public company shall comply with the Indian Accounting Standards in addition to any other accounting standard, which it may be required to comply for the preparation of the financial statements filed before the securities regulator concerned, or with the stock exchange concerned, as the case may be.

3) Non – Eligible Companies:

• Section 8 Companies and Nidhi Companies.
• Companies limited by Guarantee and having share capital.
• Companies having outstanding public deposits obtained under the Companies Act, 2013.
• Companies having negative net worth.
• Companies having defaults in payment of dues to any bank, public financial institution, non-convertible debenture holders or any other secured creditors and 2 years have not lapsed since the default has been made good.
• Companies by or against whom application is filed or pending for winding up under the Act or under the Insolvency and Bankruptcy Code.
• Companies who have defaulted in filing of its Annual Return or financial statement under the Companies Act, 2013.

SW Point of View:
These provisions are highlighting the regulatory framework and procedural requirements for
unlisted public company seeking to list its equity shares on both international and India stock
exchanges. The company and its existing shareholders are expected to adhere to specific guidelines
set by the regulatory bodies, including the Ministry of Finance & SEBI.

Isha Vedi, Audit Associate, SW India