Depository Receipts Framework in International Financial Services Centre

[Image omitted. See the official document.]

CIRCULAR

F. No. 87/IFSCA/DRs/2020-21

October 28, 2020

To, All Stock Exchanges in the International Financial Services Centre

Dear Sir/Madam,

Sub: Depository Receipts in the International Financial Services Centre (IFSC)

1. The guidelines for issue of capital, including depository receipts (DRs), in IFSCs were issued by Securities and Exchange Board of India (SEBI) in the SEBI (International Financial Services Centres) Guidelines, 2015.

2. It has been decided to enact the regulatory framework for listing of DRs in the IFSC (enclosed at Annexure-1). Further, additional requirements for listing and trading of DRs in the IFSC may be prescribed by the recognised stock exchange(s).

3. The listing of DRs in the IFSC shall be in compliance with the framework provided in Annexure-1 and the requirements that may be prescribed by the recognised stock exchange(s).

4. This circular is issued in exercise of powers conferred by section 12 of the International Financial Services Centres Authority Act, 2019 to develop and regulate the financial products, financial services and financial institutions in the International Financial Services Centres.

5. A copy of this circular is available on the website of International Financial Services Centres Authority at www.ifsca.gov.in.

Yours faithfully,

Arjun Prasad Deputy General Manager arjun.pd@ifsca.gov.in

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Annexure-1

Depository Receipts

Chapter I: Definitions

1. The terms defined herein shall bear the meanings assigned to them below, and their cognate expressions shall be construed accordingly, -

• a. “DR” or “depository receipt” means a negotiable financial instrument representing underlying securities of a company listed in another jurisdiction;
• b. "foreign jurisdiction" means a country, other than India, whose securities market regulator is a signatory to International Organization of Securities Commission's Multilateral Memorandum of Understanding (IOSCO's MMOU) (Appendix A signatories) or a signatory to bilateral Memorandum of Understanding with the IFSCA, and which is not identified in the public statement of Financial Action Task Force as:
  • i. a jurisdiction having a strategic Anti-Money Laundering or Combating the Financing of Terrorism deficiencies to which counter measures apply; or
  • ii. a jurisdiction that has not made sufficient progress in addressing the deficiencies or has not committed to an action plan developed with the Financial Action Task Force to address the deficiencies;
• c. “IFSC” or “International Financial Services Centre” shall have the same meaning as assigned to it under clause (g) of sub-section (1) of Section 3 of the International Financial Services Centres Authority Act, 2019;
• d. “IFSCA” means the International Financial Services Centres Authority established under sub-section (1) of section 4 of the International Financial Services Centres Authority Act, 2019;
• e. “listed company” means a company whose depository receipts are listed on a stock exchange(s) in IFSC under chapter III or chapter IV of this annexure;
• f. “stock exchange” means a recognised stock exchange in IFSC.

Chapter II: Eligibility Criteria

2. A company incorporated in India (outside IFSC) or in a foreign jurisdiction shall be eligible to make an issue of depository receipts only if,-

• a) the issuer is duly incorporated or established according to the relevant laws of its place of incorporation or establishment;
• b) the issuer is operating in conformity with its constitution;
• c) the issuer is authorised to issue depository receipts; and
• d) the issuance of depository receipts by the issuer is in accordance with the laws of its home jurisdiction.

3. An issuer shall not be eligible to list depository receipts if,-

• a) the issuer or any of its promoters, promoter group or directors or selling shareholders is debarred from accessing the capital market by regulatory authority in its home country or any other jurisdiction; or
• b) the issuer or any of its promoters, promoter group or directors is a wilful defaulter; or
• c) the issuer or any of its promoters, promoter group or directors is insolvent or undergoing bankruptcy proceedings; or
• d) any of its promoters, promoter group or directors is a fugitive economic offender.

4. The depository receipts shall be eligible to list only if the underlying securities which the depository receipts represent are:

• (a) freely transferable, in dematerialised form and rank pari passu with the existing securities of the same class;
• (b) fully paid and free from all liens; and
• (c) listed or will be listed in the home jurisdiction of the issuer before listing of depository receipts on stock exchange(s).

5. All the depository receipts shall be freely negotiable.

6. The issuer shall ensure that it has entered into an agreement with a depository for dematerialisation of the DRs proposed to be issued.

Chapter III: Initial Public Offer of Depository Receipts

Offer size

7. The issue of depository receipts shall be of size not less than USD 700,000 (or equivalent in foreign currency), or any other amount as may be specified by IFSCA from time to time.

Filing of Offer Document

8. The issuer shall appoint one or more merchant bankers as lead manager(s) to the issue and shall also appoint other intermediaries in consultation with the lead manager(s).

9. The issuer shall file an application with the stock exchange(s) seeking in-principle approval. The stock exchange(s) shall grant an in-principle approval or reject the application for the in-principle approval within thirty days from the date of receipt of complete information from the issuer.

10. The issuer, through the lead manager(s), shall file a draft offer document along with fee amounting to 0.05% of the offer size with the IFSCA. The lead manager(s) shall submit a due diligence certificate along with the draft offer document.

11. The draft offer document shall be made public, for comments, if any, by hosting it on the websites of the IFSCA, stock exchange(s) and lead manager(s) for a period of not less than fourteen days. The lead manager(s) shall file with the IFSCA, details of the comments received by them or the issuer from the public, on the draft offer document, during that period and the consequential changes, if any, that are required to be made in the draft offer document.

12. The IFSCA may issue observations, if any, on the draft offer document within thirty working days from the later of the following dates:

• a) the date of receipt of the draft offer document; or
• b) the date of receipt of satisfactory reply from the issuer where IFSCA has sought any clarification or additional information from them; or
• c) the date of receipt of clarification or information from any regulator or agency, where IFSCA has sought any clarification or information from such regulator or agency; or
• d) the date of receipt of a copy of in-principle approval letter issued by the stock exchange(s).

13. The issuer shall carry out changes specified by IFSCA, if any, in the offer document.

14. The issuer shall, through the lead manager(s), file the offer document with the IFSCA and the stock exchange(s).

15. The offer shall be made by the issuer within a period of not more than one year from the date of issuance of observations by the IFSCA:

Provided that if the offer is not made within the specified time period, a fresh draft offer document shall be filed.

Initial disclosures in the Offer Document

16. The offer document shall contain all material disclosures which are true, correct and adequate to enable the applicants to take an informed investment decision. The lead manager(s) shall exercise due diligence and satisfy themselves about all aspects of the issue including the veracity and adequacy of disclosures in the offer document.

17. The offer document shall contain disclosures relating to the public offer, including the following:

• A. Issuer Disclosure
  • General information
  • Statutory auditor
  • Risk factors
  • Information about the issuer
  • Business overview
  • Organisational structure
  • Management
  • Remuneration and benefits
  • Capital structure
  • Major shareholders
  • Related party transactions
  • Financial information
  • Material contracts
  • Material outstanding litigations and defaults
  • Approvals of the government/regulatory authorities, if applicable
  • Foreign investment and exchange controls of the jurisdiction of incorporation/ where the underlying securities are listed
• B. Securities Disclosures
  • Information about the underlying securities
  • Information about the DRs
  • Rights of the DR holders including dividend rights, voting rights etc.
  • Information relating to the depository
• C. Issue related Disclosures
  • Objects of the issue
  • Interim use of proceeds
  • Pricing
  • Plan of distribution and allotment
  • Placing and Underwriting
  • Taxation