Indian technology companies eyeing a US listing got a fillip after the Ministry of Corporate Affairs (MCA) on Friday clarified that such firms would not be considered as listed companies in India. Until now, if a company raised capital through equity or debt from public investors, it would be categorized as a listed company and is subject to stringent disclosure and compliance norms. The Securities and Exchange Board of India (Sebi) is the watchdog for such listed companies.
Now on, such companies will be treated as unlisted in India and would not need to follow the Sebi rules. The government eased the rules after several startups expressed concerns over being regulated by multiple agencies if they choose overseas listing.
With this rule, any company that lists its shares in a foreign jurisdiction would be answerable to the regulator of that country. For instance, a company that lists on the US stock exchanges would be regulated by the United States Securities Exchange Commission (SEC). Now, if such companies are also considered listed entities in India, it would mean they would have to comply with norms set by two market regulators.
All such public companies which are to get listed on overseas stock exchanges would get the benefit of being regarded as unlisted companies here in India, said Harish Kumar, partner, L&L Partners. “This move would give these companies necessary relaxations from the relevant compliances under the Companies Act, which are otherwise applicable to listed companies.” Since these companies are incorporated in India, they would continue to be regulated by the Ministry of Corporate Affairs and would need to follow the Indian rules for unlisted companies.