The Ministry of Corporate Affairs (MCA) in consultation with Securities and Exchange Board of India (SEBI) has amended Companies (Specification of Definition Details) Rules, 2014 in such a way that certain class of Public and Private Companies will be excluded from the definition of Listed Company.
The main motive of MCA behind liberalization of the Companies (Specification of Definition Details) Rules is to provide exemption to Public Companies which have not listed its Equity Shares but have listed their:
(a) non-convertible debt securities issued on private placement basis or
(b) non-convertible redeemable preference shares issued on private placement basis, or
in line with the SEBI norms, will no longer be treated as listed entities. Further exemption is also provided to Public companies which have not listed their equity shares on a recognized stock exchange but whose equity shares are listed on permitted stock exchanges in permissible foreign jurisdictions.
This will also be the case for Private Companies that have listed their non-convertible debt securities on private placement basis on stock exchange. The amendment provides that these Companies will not be regarded as listed entities for the purpose of the Companies Act and will be spared of the tighter regime meant for listed companies.
The move to liberalize the definition of Listed Companies is aimed at deepening the bond market by reducing the compliance burden and to improve ease of doing business. Accordingly, such Private and Public Companies falling in abovementioned category will be encouraged to list their debt securities.