The Ministry of Corporate Affairs (“MCA”) through a Notification dated 13th February, 2020 has amended the Companies (Issue of Global Depository Receipts) Rules, 2014 (“Principle Rule”). The Principle Rules emanate from the Companies Act, 2013 and will come into effect from the publication in the Gazette of India.
Please refer to the table below for the changes and implication.
| Principle Rule | Amended Rule | Implication |
| Manner and form of depository receipts
5. (1) The depository receipts can be issued by way of public offering or private placement or in any other manner prevalent abroad and may be listed or traded in an overseas listing or trading platform. (2) The depository receipts may be issued against issue of new shares or may be sponsored against shares held by shareholders of the company in accordance with such conditions as the Central Government or Reserve Bank of India may prescribe or specify from time to time. (3) The underlying shares shall be allotted in the name of the overseas depository bank and against such shares, the depository receipts shall be issued by the overseas depository bank abroad. |
Manner and form of depository receipts
5. (1) The depository receipts can be issued by way of public offering or private placement or in any other manner prevalent in the concerned jurisdiction and may be listed or traded on the listing or trading platform in the concerned jurisdiction. (2) The depository receipts may be issued against issue of new shares or may be sponsored against shares held by shareholders of the company in accordance with such conditions as the Central Government or Reserve Bank of India may prescribe or specify from time to time. (3) The underlying shares shall be allotted in the name of the overseas depository bank and against such shares, the depository receipts shall be issued by the overseas depository bank abroad. |
The Amended Rule has replaced the word “abroad” with “concerned jurisdiction”. With this change MCA has provided clarity and expanded on the term “abroad”. |
| Proceeds of issue
7.The proceeds of issues of depository receipts shall either be remitted to a bank account in India or deposited in an Indian bank operating abroad or any foreign bank (which is a Scheduled Bank under the Reserve Bank of India Act, 1934) having operations in India with an agreement that the foreign bank having operations in India shall take responsibility for furnishing all the information which may be required and in the event of a sponsored issue of Depository Receipts, the proceeds of the sale shall be credited to the respective bank account of the shareholders. |
Proceeds of issue
7.The proceeds of issues of depository receipts shall either be remitted to a bank account in India or deposited in an Indian bank operating abroad or any foreign bank (which is a Scheduled Bank under the Reserve Bank of India Act, 1934) having operations in India with an agreement that the foreign bank having operations in India shall take responsibility for furnishing all the information which may be required and in the event of a sponsored issue of Depository Receipts, the proceeds of the sale shall be credited to the respective bank account of the shareholders.
Provided that proceeds of issue of depository receipts may be remitted in an International Financial Services Centre Banking Unit (IBU) and utilised in accordance with the instructions issued by the Reserve Bank of India from time to time |
Earlier the proceeds of issue of depository receipts could be remitted to –
a bank account in India Indian bank operating abroad any foreign bank(which is a Scheduled Bank under the Reserve Bank of India Act, 1934) having operations in India.
Now with this Amendment proceeds of issue of depository receipts can additionally be remitted to an International Financial Services Centre Banking Unit (IBU) and utilised according to Reserve Bank of India instructions. |
| Non applicability of certain provisions of the Act
9.(1) The provisions of the Act and any rules issued thereunder insofar as they relate to public issue of shares or debentures shall not apply to issue of depository receipts abroad. (2) The offer document, by whatever name called and if prepared for the issue of depository receipts, shall not be treated as a prospectus or an offer document within the meaning of this Act and all the provisions as applicable to a prospectus or an offer document shall not apply to a depository receipts offer document. (3) Notwithstanding anything contained under section 88 of the Act, until the redemption of depository receipts, the name of the overseas depository bank shall be entered in the Register of Members of the company |
Non applicability of certain provisions of the Act
9.(1) The provisions of the Act and any rules issued thereunder insofar as they relate to public issue of shares or debentures shall not apply to issue of depository receipts. (2) The offer document, by whatever name called and if prepared for the issue of depository receipts, shall not be treated as a prospectus or an offer document within the meaning of this Act and all the provisions as applicable to a prospectus or an offer document shall not apply to a depository receipts offer document. (3) Notwithstanding anything contained under section 88 of the Act, until the redemption of depository receipts, the name of the overseas depository bank shall be entered in the Register of Members of the company |
With the Amendment the word “abroad” has been removed from Rule 9. This ties in the Amendment made in Rule 5 where the term “abroad” has been replaced with “concerned jurisdiction” |
Source: Ministry of Corporate Affairs
