Govt for allowing issue of IDRs by foreign companies

By Staff
|
Google Oneindia News

New Delhi, July 17 (UNI) The Ministry of Corporate Affairs has prescribed the Companies (Issue of Indian Depository Receipts) Rules, 2004 (IDR Rules), which will allow issue of Indian Depository Receipts by foreign companies.

The rules provide for eligibility for issue of Indian Depository Receipts (IDRs), procedure for making an issue of IDRs, other conditions for the issue of IDRs, registration of documents and listing of IDRs.

SEBI, as capital market regulator, in view of authorisation available to it under IDR Rules, has also issued a circular in this regard indicating other eligibility conditions for issuers.

Requests were received from SEBI and some stakeholders for review of certain requirements provided in the IDR Rules.

The changes made in the IDR Rules include networth and market capitalization ceilings being provided for as the eligibility conditions for IDR Issuers instead of earlier networth and turnover based ceilings.

This change has been done to facilitate better reflection of the financial sustainability/liquidity of the securities to be issued.

In addition, a new eligibility condition requiring the Issuer to have a continuous trading record or history on a stock exchange in its parent country for at least three immediately preceding years has been introduced. This would ensure that Issuer is a known entity with a trading track record in a capital market.

The earlier eligibility condition requiring Issuer to be making profits for at least five preceding years has been aligned with the Companies Act, 1956 and brought at par with the condition in this regard for domestic issues. This will provide that Issuer should have a track record of distributable profits in terms of section 205 of the Companies Act, 1956, for at least three out of immediately preceding five years.

UNI

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