Framework for issue of Depository Receipts

Page 1 of 6 CIRCULAR SEBI/HO/MRD/DOP1/CIR/P/2019/106 October 10, 2019 To, 1. All recognized Stock Exchanges 2. All Listed Companies through recognized Stock Exchanges 3. All recognized Depositories 4. All recognized Custodians Dear Sir / Madam, Subject: Framework for issue of Depository Receipts 1. Reference is drawn to Section 41 of the Companies Act, 2013, Companies (Issue of Global Depository Receipts) Rules, 2014 (‘GDR Rules’), the Depository Receipts Scheme, 2014 (‘DR Scheme’), Reserve Bank of India (‘RBI’) notification dated December 15, 2014, Central Government notification dated September 18, 2019 and Central Government notification dated October 07, 2019. 2. In light of the aforesaid, only ‘a company incorporated in India and listed on a Recognized Stock Exchange in India’ (‘Listed Company’) may issue Permissible Securities or their holders may transfer Permissible Securities, for the purpose of issue of Depository Receipts (‘DRs’), subject to compliance with the following requirements: Eligibility 2.1. Listed Company is in compliance with the requirements prescribed under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and any amendments thereof. 2.2. Listed company shall be eligible to issue Permissible Securities, for the purpose of issue of DRs, if: (a) the Listed Company, any of its promoters, promoter group or directors or selling shareholders are not debarred from accessing the capital market by SEBI; (b) any of the promoters or directors of the Listed Company is a promoter or director of any other company which is not debarred from accessing the capital market by SEBI; (c) the listed company or any of its promoters or directors is not a wilful defaulter; (d) any of its promoters or directors is not a fugitive economic offender. Page 2 of 6 2.3. Existing holders shall be eligible to transfer Permissible Securities, for the purpose of issue of DRs, if: (a) the Listed Company or the holder transferring Permissible Securities are not debarred from accessing the capital market by SEBI; (b) the Listed Company or the holder transferring Permissible Securities is not a wilful defaulter; (c) the holder transferring Permissible Securities or any of the promoters or directors of the Listed Company are not a fugitive economic offender. Explanation 1: The restrictions at Paragraph (2.2) and (2.3) above shall not apply to the persons or entities mentioned therein, who were debarred in the past by SEBI and the period of debarment is already over as on the date of filing of the document as referred at Paragraph (2.13). Explanation 2: For the purpose of this Circular, DR means a foreign currency denominated instrument, listed on an international exchange, issued by a foreign depository in a permissible jurisdiction on the back of permissible securities issued or transferred to a domestic custodian and includes ‘global depository receipt’ as defined in section 2(44) of the Companies Act, 2013. Explanation 3: For the purpose of this Circular ‘Foreign Depository’ means a person which: (a) is not prohibited from acquiring permissible securities; (b) is regulated in any of the Permissible Jurisdiction as defined in this Circular; and (c) has legal capacity to issue DRs in the Permissible Jurisdiction where issue of DRs is proposed. Explanation 4: For the purpose of this Circular, ‘transfer of permissible securities by existing holders’ means deposit of existing Permissible Securities of the Listed Company with a Domestic Custodian, for the purpose of issue of DRs, pursuant to formal agreement(s) among the Listed Company and the Foreign Depository. For this purpose, the Listed Company may also enter into arrangement(s) with, Indian Depository, Domestic Custodian and existing Permissible Securities holder(s), as may be necessary. 2.4. For the purpose of an initial issue and listing of DRs, pursuant to ‘transfer by existing holders’, the Listed Company shall provide an opportunity to its equity shareholders to tender their shares for participation in such listing of DRs. 2.5. Subsequent issue and listing of DRs, pursuant to ‘transfer by existing shareholders’ may take place subject to the limits approved pursuant to a special resolution in terms of GDR Rules. 2.6. A company proposing to make a public offer and list on a Recognized Stock Exchange, and also simultaneously proposing to issue Permissible Securities or transfer Permissible Securities of existing holders, for the purpose of issue of DRs and listing such DRs on an International Exchange, may seek in-principle and final approval from Recognized Stock Exchange as well as International Exchange. However, such issue or transfer of Permissible Securities for the Page 3 of 6 purpose of issue of DRs shall be subsequent to, the receipt of trading approval from the Recognized Stock Exchange for the public offer. Permissible Jurisdictions and International Exchanges 2.7. Listed Company shall be permitted to issue Permissible Securities or transfer Permissible Securities of existing holders, for the purpose of issue of DRs, only in Permissible Jurisdictions and said DRs shall be listed on any of the specified International Exchange(s) of the Permissible Jurisdiction. Explanation 1: For the purpose of this Circular, ‘Permissible Jurisdiction’ shall mean jurisdictions as may be notified by the Central Government from time to time, pursuant to notification no. G.S.R. 669(E) dated September 18, 2019 in respect of sub-rule 1 of rule 9 of Prevention of Money-Laundering (Maintenance of Records) Rules, 2005. Explanation 2: For the purpose of this Circular ‘International Exchange(s)’ shall mean exchange(s) as may be notified by SEBI from time to time. 2.8. Listing of DRs on specified International Exchange shall meet the highest applicable level / standards for such listing by foreign issuers. Explanation: Examples of DR listing programs that would qualify for the aforesaid criteria: Issuer-sponsored Level III ADR programs listed on Nasdaq or the NYSE, DRs listed on the Main Board of the Hong Kong Stock Exchange, Global Depositary Receipts admitted to the Standard Segment of the Official List of the FCA and to trading on the London Stock Exchange. Obligations of Listed Company 2.9. Listed Company shall ensure compliance with extant laws relating to issuance of DRs, including, requirements prescribed in this Circular, the Companies Act, 2013, the Foreign Exchange Management Act, 1999 (‘FEMA’), Prevention of Money-Laundering Act, 2002, and rules and regulations made thereunder. For this purpose, Listed Company may also enter into necessary arrangements with Custodian, Indian Depository and Foreign Depository. 2.10. Listed Company shall ensure that DRs are issued only with Permissible Securities as the underlying. Explanation: For the purpose of this Circular, ‘Permissible Securities’ shall mean equity shares and debt securities, which are in dematerialized form and rank pari passu with the securities issued and listed on a Recognized Stock Exchange. 2.11. Listed Company shall ensure that the aggregate of Permissible Securities which may be issued or transferred for the purpose of issue of DRs, along with Permissible Securities already held by persons resident outside India, shall not exceed the limit on foreign holding of such Permissible Securities under the applicable regulations of FEMA: Page 4 of 6 Provided that within the above limit, the maximum of aggregate of Permissible Securities which may be issued by the Listed Company or transferred by the existing holders, for the purpose of issue of DRs, shall be such that the Listed Company is able to ensure compliance with the minimum public shareholding requirement, after excluding the Permissible Securities held by the depository for the purpose of issue of DRs.