Startups can soon list abroad, Finance Ministry to announce a special deal: Sources
The Ministry of Finance is said to be mulling changes to the Foreign Exchange Management Act (FEMA), Income Tax Act, and Companies Act. Sources whom YourStory spoke to suggest that there may be amendments to the tax code that would affect how shares owned in entities listed abroad are taxed.
Indian companies may also soon see a new law that will allow them to list overseas with ease.
Overseas listing is not a new concept. Several Indian companies have approached London's Alternative Investment Market in the past. Securities and Exchange Board of India (SEBI) first floated this idea in 2018 and at the time, they had stated that to list abroad, it would require changes in the taxation and Foreign Exchange Management Act (FEMA).
To affect this change, an amendment may be brought to the Companies Act. The Finance Ministry had reiterated its commitment to study this in March 2020 before the COVID-19 pandemic put a stop to any discussions on the topic.
According to the sources, the amendment would pertain to specifying what type of investors would be allowed in these companies and from which regions. However, this may further complicate the issue because the companies will also have to follow local jurisdiction norms.
Under the rules of FEMA and Companies Act, Indian companies should list in India before they list in another market. The current rules mandate companies to list in an Indian stock exchange before listing itself abroad.
Infosys is the classic case of a company listed in India and listed on Nasdaq. Several Indian companies have created a holding structure in Mauritius before listing in the US.
Thus, amendments would have to be brought in to ease this rule.
According to the sources, the Finance Ministry will also keep anti-money laundering norms in mind before allowing Indian companies to access foreign bonuses.