On 19 February 2021 the Ministry of Corporate Affairs brought much-awaited relief to purely debt-listed public and private companies by exempting them from the purview of ‘listed companies’ (and associated compliances) under the Companies Act 2013 and the rules thereunder. This amendment comes into effect on 1 April 2021.

Amended definition of ‘listed company’

The following company categories have been excluded from the definition of ‘listed company’ under the Companies Act 2013 through an amendment to the Companies (Specification of Definitions Details) Rules 2014:

• public companies that have not listed their equity shares but have listed non-convertible debentures or non-convertible redeemable preference shares under an applicable law, on a private placement basis;
• private companies that have listed their non-convertible debentures on a private placement basis under an applicable law; and
• public companies that are exclusively listed in permissible foreign jurisdictions as notified under Section 23(3) of the Companies Act 2013.

Comment

The finance minister foreshadowed this change in her 17 May 2020 speech as part of the May 2020 stimulus package, and the Companies (Amendment) Act 2020 introduced an enabling provision that established a framework for this change. The rationale for the amended definition is to reduce the compliance burden and facilitate the conduct of business for Indian companies.

However, the scope of the exclusion is limited to compliances as a ‘listed company’ under the Companies Act 2013 and the rules thereunder. The Securities and Exchange Board of India (SEBI) has not yet relaxed the stipulations of the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 for companies which have listed only their non-convertible debentures or non-convertible redeemable preference shares on a stock exchange. Considering that the amendment was made in consultation with SEBI, it remains to be seen whether SEBI will also amend the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 to reduce the compliance burden for these categories of company.

For further information on this topic please contact Gautam Ganjawala, Shivanand Nayak or Janhavi Patankar at AZB & Partners by telephone (+91 22 4072 9999) or email (gautam.ganjawala@azbpartners.com, shivanand.nayak@azbpartners.com or janhavi.patankar@azbpartners.com). The AZB & Partners website can be accessed at www.azbpartners.com.

Authors:

Gautam Ganjawala, Partner
Shivanand Nayak, Senior Associate
Janhavi Patankar, Associate