In a significant development with profound implications for both IP law firms and businesses, the Indian government has taken a significant step by allowing Indian companies to directly list on foreign exchanges under specified conditions. This decision signifies a substantial departure from traditional methods, such as American Depository Receipts (ADRs) and Global Depository Receipts (GDRs), for overseas listings.
The Ministry of Corporate Affairs has formally introduced the relevant section of the Companies Act, marking a pivotal milestone in this endeavor. The ministry’s notification, released on October 30th, is phrased as follows: “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.” Section 5 of the Companies Act empowers specific categories of public companies to list their securities on authorized stock exchanges in designated foreign jurisdictions or other jurisdictions as may be specified.
The comprehensive regulations governing procedures for Indian companies’ direct overseas listings are yet to be formalized, and is vital to be noted. The government is expected to outline eligibility criteria and procedural guidelines, eagerly anticipated by businesses and IP legal experts. In a groundbreaking revelation in July, Finance and Corporate Affairs Minister Nirmala Sitharaman unveiled the government’s plan to enable domestic firms to list abroad, granting access to global capital markets. This groundbreaking decision was initially presented as part of the May 2020 COVID-19 relief package.
Furthermore, as part of the comprehensive strategic vision, Indian companies are positioned to initiate listings at the International Financial Services Centre, situated in GIFT City, Ahmedabad. Subsequently, they will have the privilege to explore listings in eight to nine designated overseas jurisdictions. This phased approach endows companies with increased flexibility and access to a wider array of international markets. The Securities and Exchange Board of India (SEBI), the authoritative body responsible for overseeing India’s securities markets, had already established the groundwork by presenting a framework designed to facilitate these direct listings. It is widely anticipated that this SEBI framework will serve as the cornerstone for future regulations in this legal domain.
The framework proposed by SEBI entails permitting listings on stock exchanges in ten “permissible jurisdictions.” These jurisdictions are characterized by robust anti-money laundering regulations and encompass prestigious global exchanges such as the New York Stock Exchange (NYSE), Nasdaq, the London Stock Exchange (LSE), and the Hong Kong Stock Exchange. Furthermore, this list includes other major exchanges situated in countries like Japan, South Korea, France, Germany, Switzerland, and Canada. SEBI’s recommendations are designed to ensure that Indian companies can gain access to reputable, well-regulated international exchanges, consequently enhancing their global presence.
This transformative milestone heralds a new chapter for Indian enterprises, unlocking prospects for heightened foreign investments and global growth. Simultaneously, it accentuates the vital requirement for a robust legal framework, especially concerning intellectual property rights, to shield these enterprises in their global endeavors. Legal specialists and IP law firms are poised to assume a pivotal role in guiding Indian companies through this intricate journey, assuring the preservation of their IP assets on the global arena.