Through a Circular dated 18th December, 2020 the Securities and Exchange Board of India (“SEBI”) has issued clarification regarding “Framework for issue of Depository Receipts” which was earlier issued by SEBI through SEBI Circular No. SEBI/HO/MRD/DOP1/CIR/P/2019/106 dated October 10, 2019 (detailed in the trail mail).
On the basis of representation from market participants, SEBI has revised the previous Circular as detailed below:
| Circular dated October 10, 2019 | Circular dated December, 18, 2020 | Implication |
| Paragraph 2.15:
Permissible holder means a holder of DR, including its Beneficial Owner(s), satisfying the following conditions:
(a)who is not a person resident in India;
(b)who is not a Non-Resident Indian (NRI)
Explanation1: For the purpose of this Circular, ‘Beneficial Owner’ shall have the same meaning as provided in proviso to sub-rule 1 of rule 9 of Prevention of Money Laundering (Maintenance of Records) Rules, 2005, as amended by the Central Government vide notification no. G.S.R. 669(E) dated September 18, 2019.
Explanation 2: The Permissible holder, including its Beneficial Owner(s), shall be responsible for ensuring compliance with this requirement. |
Paragraph 2.15:
Permissible holder means a holder of DR, including its Beneficial Owner(s), satisfying the following conditions:
(a)who is not a person resident in India;
(b)who is not a Non-Resident Indian (NRI).
Provided that the restriction under this Clause shall not apply in case of issue of DRs to NRIs, pursuant to share based employee benefit schemes which are implemented by a company in terms of SEBI (Share Based Employee Benefits) Regulations 2014.
Provided further that the restriction under this Clause shall also not apply in case of issue of DRs by the company to NRIs pursuant to a bonus issue or a rights issue;
Explanation1: For the purpose of this Circular, ‘Beneficial Owner’ shall have the same meaning as provided in proviso to sub-rule 1 of rule 9 of Prevention of Money Laundering (Maintenance of Records) Rules, 2005, as amended by the Central Government vide notification no. G.S.R. 669(E) dated September 18, 2019.
Explanation 2: The Permissible holder, including its Beneficial Owner(s), shall be responsible for ensuring compliance with this requirement.
Explanation 3: Except as permitted under the provisos above, NRIs shall neither subscribe to any further issue of DRs nor make any further acquisition of DRs (including of DRs issued prior to October 10, 2019) |
Now, NRIs under the employee benefit scheme [as per the SEBI (Share Based Employee Benefits) Regulations 2014] can be a permissible holder of DRs.
The definition of permissible holder is revised to insert a proviso stating that restriction under the clause will not apply to issue of DRs to NRIs pursuant to share based employee benefit schemes implemented under the SEBI (Share Based Employee Benefits) Regulations 2014.
Further, the restriction will also not apply in case of issue of DRs by the company to NRIs pursuant to a bonus issue or a rights issue
Further, it has been clarified that except as permitted, NRIs should not subscribe to any further issue of DRs nor make any further acquisition of DRs (including of DRs issued prior to October 10, 2019). |
| Not present | Paragraph 2.12A:
The onus of identification of NRIs holders, who are issued DRs in terms employee benefit scheme, would lie with the listed company. The listed company shall provide the information of such NRI DR holders to the designated depository for the purpose of monitoring of limits |
A new clause is inserted wherein the listed company has been given the responsibility of identification of NRI holders who are issued DRs under the employee benefit scheme.
The listed company has to provide information of such NRI DR holder to the designated depository for the purpose of monitoring limits.
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Further, Stock Exchanges and Depositories are advised to:
a) make necessary amendments to the relevant bye-laws, rules and regulations for the implementation of the above circular; and
b) bring the provisions of this circular to the notice of the issuers, Domestic Custodians and also to disseminate the same on the website.
Source: Securities and Exchange Board of India
