The new proposal for amending the foreign exchange listing norms of Indian companies will be out soon. The proposal got the cabinet approval in march and its in the final stage of implementation. Currently, Indian companies can list in foreign exchange after listing in India. The new proposal will pave the way for Indian companies to list their shares in foreign exchange without listing in India first.
The officials said that the ministry of corporate affairs will propose changes to the Foreign Exchange Management Act (FEMA), the Income Tax Act, and the Companies Act. The new proposal will include amendments on taxing share transfers in India and adding enabling provisions under the Companies Act 2013 to allow the listing of certain classes of securities on stock exchanges in permissible foreign jurisdictions. The idea of the foreign listing is put forward by the committee appointed by the market regulator Security and Exchange Board of India. The committee consists of members from SEBI, capital institutions, and large law firms. They suggested the easing of provisions of taxation and FEMA for Indian companies among others.
Foreign listing of shares will likely provide Indian companies with an alternate route to access capital and will also bring exposure to a broader and likely more global investor base. Cross-listing will facilitate global peer group comparisons and may lead to accurate benchmarking. Some of the successful startups in the technology and internet sector, including companies commonly referred to as unicorns, which may still not be profitable, maybe able to access larger pools of capital from foreign markets in developed economies. It will also facilitate border investors base, global brand recognition, and international expansion plans.
Foreign Exchange Management Act does not contemplate a company incorporated in India and listed on a foreign stock exchange selling shares to a person resident outside India. The Companies Act 2013 has rules for public offers and private placements of securities applicable to all companies incorporated in India, including companies that issue ADRs/GDRs, and those that would propose to list their equity shares on foreign stock exchanges.
