MCA Provides Exemptions to Companies with Listed Debt Securities

The Ministry of Corporate Affairs, on February 19, 2021, 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 from April 1, 2021.

Definition of ‘Listed Company’ – Amended

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

•     public companies who have not listed their equity shares but have listed non-convertible debentures and/or non-convertible redeemable preference shares under applicable law, on a private placement basis;

•     private companies who have listed their non-convertible debentures on a private placement basis under applicable law; and

•     public companies who are exclusively listed in permissible foreign jurisdictions as notified under Section 23(3) of the Companies Act.

Way Forward

This change was foreshadowed, on May 17, 2020, by the Hon’ble Finance Minister in her speech as part of the May 2020 stimulus package and an enabling provision establishing a framework for such change was introduced by the Companies (Amendment) Act, 2020. The rationale for this relaxation is to reduce the compliance burden and ensure ease of doing business for Indian companies.

However, the scope of the present exclusion is limited to compliances as a ‘listed company’ under the Companies Act and the rules thereunder. The Securities and Exchange Board of India (‘SEBI’) has not, so far, issued anything to relax the stipulations of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (‘LODR’) for such companies which have listed only their non-convertible debentures / non-convertible redeemable preference shares on a stock exchange. Considering that the amendment was made in consultation with SEBI, we will have to wait and see whether SEBI also considers amending LODR to reduce the compliance burden of these categories of companies.