Announcing the fifth and final tranche of stimulus measures, Union Finance Minister Nirmala Sitharaman said direct listing of securities by Indian public companies will now be permissible in foreign jurisdictions. Private companies, which list their non-convertible debentures on stock exchanges, will now not be regarded as listed companies, she added.
Sitharaman said reforms will be the focus of the fifth and final tranche of economic stimulus package to deal with the economic fallout of the COVID-19 pandemic. She said the package would focus on MGNREGA, healthcare and education, businesses, de-criminalisation of the Companies Act, ease of doing business, public sector undertakings, and resources related to state government.
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With an eye on further enhancement of the Ease of Doing Business, the government said it will create additional or specialised benches for National Company Law Appellate Tribunal (NCLAT). Also, there will be lower penalties for all defaults of small companies, one-person companies, producer companies, and start-ups.
“This is another important announcement in the series of decriminalisation of the provisions of Companies Act, 2013. This is not the first time. The Companies Act, 2013 has been earlier amended to remove criminal punishment for many procedural and trivial offenses. This is being done to facilitate ease of doing business for corporates,” Lalit Kumar, Partner at J Sagar Associates.
A source who worked closely for this regulation told Moneycontrol: "This measure may give benefit in long run. As companies now will have option to tap high liquidity and lower cost market without any hurdle. However, it is not beneficial for domestic investor, they will not get chance to take benefit of good companies. Now, government may treat International Financial Service Centre (IFSC) as international listing".
“Direct listing of securities in permitted jurisdictions, which was earlier recommended by the SEBI (Securities and Exchange Board of India) committee, will now become a reality with these proposed reforms. In the current and post COVID-19 economic environment, many of our large and new age companies will need access to deeper pools of capital, at the right valuations and in a market with their relevant peer group,” said Sai Venkateshwaran, Partner and Head, CFO Advisory, KPMG in India.
