MCA Notifies Norms w.r.t Listing of Equity Shares in IFSC by Public Companies

Notification G.S.R. 61(E), Dated 24-01-2024

Earlier, the Government set October 30, 2023, as the enforcement date for section 5 of the Companies (Amendment) Act, 2020. This section pertains to public offers and private placement. It introduced new sub-sections allowing specified public companies to issue securities for listing on approved stock exchanges in permissible foreign jurisdictions or as prescribed.

Later, the MCA vide notification no. G.S.R. 61(E) dated 24-01-2024, has notified the Companies (Listing of equity shares in permissible jurisdictions) Rules, 2024. These regulations apply to unlisted public companies and listed public companies issuing securities for listing on approved stock exchanges in permissible jurisdictions, such as the IFSC (International Financial Services Centre).

The Permitted exchanges include the India International Exchange and NSE International Exchange. Additionally, the Ministry of Corporate Affairs (MCA) outlines certain ineligible entities under these rules, such as Nidhi Companies and companies limited by guarantee.

Applicability of the norms for listing equity shares in the permissible jurisdictions

The provisions of the Companies (Listing of equity shares in permissible jurisdictions) Rules, 2024, shall apply to the following companies which issue their securities for listing on permitted stock exchanges in permissible jurisdictions:

(a) Unlisted public companies;

(b) Listed public companies, [so far as they are following regulations framed or directions issued in this regard by the SEBI or Authority)]

Listing on eligible stock exchange in Approved jurisdictions

1. An unlisted public company, which is not ineligible and has no partly paid-up shares, may issue equity shares including offer for sale by existing shareholders for the purpose of listing on a stock exchange in a permissible jurisdiction.
2. The unlisted public company or its existing shareholders shall also comply with the requirements of the Scheme.
3. Listing of equity shares on permitted stock exchange in permissible jurisdiction by an unlisted public company which also intends to get its equity shares listed with any recognized stock exchange as defined under section 2(f) of the Securities Contract (Regulation) Act, 1956 shall also comply the conditions stipulated by SEBI.
4. After the listing of the equity shares in a permissible jurisdiction, the company shall comply with Indian Accounting Standards as specified in the Annexure to the Companies (Indian Accounting Standards) Rules, 2015 in preparation of their financial statements along with any other accounting standard required to comply with.

Filing of Prospectus for Unlisted Public Cos in Permissible Jurisdictions

Rule 4(4) of the Companies (Listing of Equity Shares in Permissible Jurisdictions) Rules, 2023 stipulates the reporting requirement requiring an unlisted public company to submit its prospectus using e-Form LEAP-1 within 7 days after finalizing and filing it with the authorized international stock exchange. This form must be electronically filed in the MCA21 Registry for record-keeping purposes.

Eligibility Criteria: Companies ineligible to Issue Securities in Approved Jurisdictions

As per the Companies (Listing of equity shares in permissible jurisdictions) Rules, 2024, a company ineligible to issue securities under this rule is:

(a) has been registered under section 8 or declared as Nidhi under section 406 of the Act;

(b) is a company limited by guarantee and also having a share capital;

(c) has any outstanding deposits accepted from the public;

(d) has a negative net worth;

(e) has defaulted in payment of dues to any bank or public financial institution or non-convertible debenture holder or any other secured creditor.

(f) It should be noted that this clause shall not apply if the company had made good the default and a period of two years had lapsed since the date of making good the default;

(g) has made any application for winding-up under the Act or for resolution or winding-up under the IBC, 2016 and in case any proceedings against the company for winding-up under the Act or for resolution or winding-up under the IBC, 2016 is pending;

(h) has defaulted in filing of an annual return under section 92 or a financial statement under section 137 of the Act within the specified period.

An unlisted public company, which does not fall under the above list and which has no partly paid-up shares, may issue equity shares for the purposes of listing on a stock exchange in a permissible jurisdiction. It is to be noted that the conditions specified under FEM (Non-Debt Instrument), Amendment Rules, 2024 is to be complied with.

Conclusion:

In conclusion, the Companies (Listing of equity shares in permissible jurisdictions) Rules, 2024, introduced by the Ministry of Corporate Affairs (MCA), mark a significant step towards enabling unlisted and listed public companies to issue securities for listing on approved stock exchanges in permissible foreign jurisdictions.

These regulations provide clarity on eligibility criteria, listing requirements, and reporting obligations, fostering transparency and compliance within the international financial landscape.

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