Regulatory updates

On 30 October 2023, the Ministry of Corporate Affairs (MCA) had notified section 5 of the Companies (Amendment) Act, 2020, thereby amending Section 23 of the Companies Act, 2013, which allowed certain class of Indian public companies to list their securities on permitted foreign stock exchanges. However, a detailed framework/rules for operationalisation of this regulation was awaited.

On 24 January 2024, MCA issued the Companies (Listing of equity shares in permissible jurisdictions) Rules, 2024 (the 2024 Rules). Some of the key guidelines include:

• Applicability: The 2024 Rules would apply to:

• Unlisted public companies, and
• Listed public companies, so far as they are in accordance with the regulations framed or directions issued by SEBI or the relevant authority⁹ ‘Authority’ w.r.t. the 2024 Rules means the International Financial Services Centres Authority established under Section 4 of the International Financial Services Centres Authority Act, 2019.

which issue their securities for the purpose of listing on permitted stock exchanges¹⁰ India International Exchange, NSE ; International Exchange in permissible jurisdictions¹¹ International Financial Services Centre.

• Eligibility criteria: Every company would be eligible for issuing its equity shares for listing, except for the ones which fall under Rule 5 of the 2024 Rules. These include companies which:

• Have been registered under Section 8 or declared as Nidhi under Section 406 of the Companies Act, 2013 (the Act)
• Are limited by guarantee and also having share capital
• Have any outstanding deposits accepted from the public as per Chapter V of the Act and rules made thereunder
• Have a negative net worth
• Have defaulted¹² This clause would 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. in payment of dues to any bank or public financial institution or non- convertible debenture holder or any other secured creditor
• Have made any application for winding-up under the Act or for resolution or winding-up under the Insolvency and Bankruptcy Code, 2016 (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
• Have defaulted in filing of an annual return under Section 92 or financial statements under Section 137 of the Act within the specified period.

• Procedure for listing: The 2024 Rules state that an unlisted public company should file the prospectus in e-Form LEAP-1 within a period of seven days after the same has been finalised and filed in the permitted exchange. After listing, a company needs to comply with Indian Accounting Standards (Ind AS) for preparation of their financial statements, in addition to any other accounting standard, which they may be required to comply.

Effective date: The 2024 Rules came into force from the date of their publication in the Official Gazette, i.e., 24 January 2024.

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To access the text of the 2024 Rules, please click here