On 19 September, the Lok Sabha of India has passed the Companies Amendment Bill, 2020. The new amendment will allow startups to list their companies to foreign jurisdictions with a particular securities class. At present, Indian companies cannot directly list abroad before getting public domestically. It also seeks decriminalization of certain offenses listed in the Companies Act, 2013. It includes defaults that can be determined objectively. However, only if there is no fraud element or do not jeopardize the more considerable public interest.
Nirmala Sitharaman, the Finance Minister of India (1), stated that the Modi Government is focused on decriminalizing individual companies’ law. The move would promote the ease of doing business for small enterprises. The total number of penal provisions will be lessened to 124 from 134. Sitharaman further added that there would be no change in the non-compoundable offenses provisions. It will remain at 35, as mentioned in the 2013 bill.
Direct Overseas Listing Would Be Game Changer For Indian Startups Economy
In February, Atanu Chakraborty, from the DAE, Department of Economic Affairs of Finance Ministry, confirmed that India’s startups would soon be able to list their businesses in Indian and overseas markets directly. His statement came after several firms declared their interest to get public in both Indian and foreign markets at the same time.
In December 2019, Rajan Anandan, MD of Sequoia India, stated that India should allow startups to list in overseas markets. Notably, foreign markets such as the US and Singapore have a better understanding of startups’ economies. There are also more favorable policies was startup markets.
Anandan stated that over 10 to 20 firms are ready for public listing if the government allows them. Many Indian startups, including Flipkart, PhonePe, and Zomato, are planning to issue an IPO, initial public offering, and ready to go public in upcoming months. Many startups have also expressed their interest for overseas listing.
At present, India’s policies do not allow startups to list their companies in the overseas market directly. Many firms set up parent entities in other countries such as the US, Singapore, and others to become eligible for foreign listing. Organizations such as Infosys and Reliance Industries have taken the path to access foreign capital via ADR or GDR.