Government Permits Overseas Listing of Indian Companies

In a significant move, the Ministry of Corporate Affairs (MCA) permitted overseas listing of Indian companies, subject to certain conditions. On 30 October 2023, the MCA notified that Section 5 of the Companies (Amendment) Act, 2020 will come into effect. Section 5 of the Companies (Amendment) Act proposes an amendment to the Companies Act, 2013 to permit Indian companies to list on foreign exchanges. 

Thus, Section 23 of the Companies Act, 2013 was amended to allow certain classes of public companies to list their securities on permitted stock exchanges in permitted foreign jurisdictions as per the MCA notification. 

Before passing this amendment, the local listed entities could list overseas only through American Depository Receipts (ADRs) and Global Depository Receipts (GDRs).

However, the amendment for direct overseas listing of Indian companies is yet to be notified in the e-gazette.

The Securities and Exchange Board of India (SEBI) had recommended a framework within which direct listing of companies will be facilitated, and the SEBI framework might be the basis for future regulation in this area. 

The SEBI had proposed allowing listings on stock exchanges in ten permissible foreign jurisdictions with strong anti-money laundering regulations, including the Nasdaq, NYSE, the LSE and Hong Kong, along with certain other major exchanges in South Korea, Japan, Germany, Switzerland, France and Canada. 

Equity listings on foreign stock exchanges by Indian companies would allow them to access foreign capital at a lower cost. Similarly, equity listings of foreign companies on Indian Stock Exchanges would improve the efficient capital allocation and diversification for investors across the Indian economy.

For any clarifications/feedback on the topic, please contact the writer at mayashree.acharya@cleartax.in

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