Govt allows direct overseas listing of firms; notifies under companies law

In a significant move, the government has permitted Indian companies to list on foreign exchanges, subject to certain conditions.

The corporate affairs ministry has notified the relevant section under the companies law in this regard.

Currently, overseas listings by local listed entities are carried out through American Depository Receipts (ADRs) and Global Depository Receipts (GDRs).

"In exercise of the powers conferred by sub-section (2) of section 1 of the Companies (Amendment) Act, 2020 (29 of 2020), the Central Government hereby appoints the 30th day of October 2023 as the date on which the provisions of section 5 of the said Act shall come into force," the ministry said in a notification on October 30.

The rules for direct overseas listing of Indian companies are yet to be notified.

Section 5 allows certain classes of public companies to list their securities on permitted stock exchanges in permissible foreign jurisdictions or such other jurisdictions, as may be prescribed.

On October 13, a senior government official said the ministry was looking at various aspects, including the possible eligibility criteria, to prepare the rules for the direct overseas listing of companies.

On July 28, Finance and Corporate Affairs Minister Nirmala Sitharaman said the government has decided to allow domestic companies to list overseas to help them access capital from the world markets.

In May 2020, the move was announced as part of the Covid relief package.

A senior government official, on July 28, said that initially, the plan is to allow companies to list at the International Financial Services Centre in GIFT City, Ahmedabad, and later, they can list in any of the eight to nine specified overseas jurisdictions.

The Securities and Exchange Board of India (Sebi) had previously recommended a framework within which such direct listing will be facilitated, and it is expected that the Sebi framework will be the basis for future regulation in this area.

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