Direct Foreign Listing of Indian Companies: MCA Imposes Key Company Law Provisions

09 Nov 2023
  • DMD Advocates
  • Blog

What happened?

The Ministry of Corporate Affairs (MCA) has notified effect to the provisions of sub-section (3) and (4) of Section 23 of the Companies Act, 2013 vide notification dated October 30, 2023. The said provisions were proposed to be inserted vide the Companies (Amendment) Act, 2020.

Section 5 of the Companies (Amendment) Act, 2020, which amends Section 23 of the Companies Act, 2013, states as follows:

“Amendment of Section 23: In section 23 of the principal Act, after sub-section (2) and before the Explanation, the following sub-sections shall be inserted, namely:

(3) Such class of public companies may issue such class of securities for the purposes of listing on permitted stock exchanges in permissible foreign jurisdictions or such other jurisdictions, as may be prescribed.
(4) The Central Government may, by notification, exempt any class or classes of public companies referred to in sub-section (3) from any of the provisions of this Chapter, Chapter IV, section 89, section 90 or section 127 and a copy of every such notification shall, as soon as may be after it is issued, be laid before both Houses of Parliament.”


Previously, companies incorporated in India could only list their shares on foreign stock exchanges via American Depository Receipts and Global Depository Receipts. Direct listings on foreign exchanges were not permitted, and vice versa.

On June 12, 2018, an expert committee was constituted under the Securities and Exchange Board of India namely the “Expert Committee for listing of equity shares of companies incorporated in India on foreign stock exchanges and of companies incorporated outside India on Indian stock exchanges.” The committee was tasked to analyse the implications and carve a path for direct listing of shares from the perspective of the Indian companies.

The committee submitted its report on December 4, 2018. It recommended that direct listing would increase the competitiveness of Indian companies vis-à-vis their global competitors as it would help them get similar benefits in terms of capital and the cost of capital which are enjoyed by their international counterparts.

The expert committee suggested a list of the following permissible jurisdictions:
• United States of America- NASDAQ, NYSE
• United Kingdom- London Stock Exchange
• China- Shanghai Stock Exchange, Shenzhen Stock Exchange
• Japan- Tokyo Stock Exchange, Osaka Securities Exchange
• Hong Kong- Hong Kong Stock Exchange
• South Korea- Korea Exchange Inc.
• Switzerland- SIX Swiss Exchange
• France- Euronext Paris
• Germany- Frankfurt Stock Exchange
• Canada- Toronto Stock Exchange

Key Takeaways

Under the new law, a certain class of public companies would be given the right to list its permissible securities on foreign stock exchanges in permissible foreign jurisdictions and it also includes provision for exemption by Central Government. It aids to the agenda of ease of doing business, helps companies improve their valuation and serves as an alternative avenue for domestic companies to raise capital.

MCA and the Department of Economic Affairs have been working on the rules that will be framed for the purpose. The Government will accordingly notify a framework, specifying the kind of public companies which can issue such classes of securities that would be eligible for such overseas listing including the permissible jurisdictions.

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