LEAP to listing: India permits direct listing of shares overseas through IFSC

MCA & MOF notify rules for the same

– Vinita Nair & Prapti Kanakia |

Indian companies were permitted to raise funds from overseas either pursuant to issue of depository receipts listed overseas or having the non-residents subscribe to issuances made in India or by way of borrowing overseas. As an initiative to provide an avenue to access global capital markets, GoI had announced the decision to ease raising of foreign funds in order to boost foreign investment inflows, unlock growth opportunities and offer flexibility to Indian companies to raise funds. Consequently, an enabling provision for direct listing of prescribed class of securities on permitted stock exchanges in permissible foreign jurisdictions was inserted vide Companies (Amendment) Act, 2020 in Section 23 of Companies Act, 2013 (‘CA, 2013’), that deals with permissible modes of issue of securities, vide notification dated September 28, 2020 and made effective from October 30, 2023. Thereafter, the Ministry of Corporate Affairs (‘MCA’) notified Companies (Listing of equity shares in permissible jurisdictions) Rules, 2024 (‘LEAP Rules’) effective from January 24, 2024. As listing of shares abroad will result in raising funds from persons resident outside India, Ministry of Finance (‘MoF’) notified FEMA (Non-Debt Instruments) Amendment Rules, 2024 amending FEMA (Non-Debt Instruments) Rules, 2019 (‘NDI Rules’) with effect from January 24, 2024. SEBI is also expected to roll out the operational guidelines for listed companies to list their equity shares on permitted stock exchanges.[1]

Additionally, FAQs on direct listing scheme (FAQs) have also been rolled out on January 24, 2024. Further, two of the key recommendations of the working group report on Direct Listing of Listed Indian Companies on IFSC Exchanges submitted in December 2023 was to notify the rules under Section 23 (3) and (4) of CA, 2013 and notify necessary amendments in NDI Rules to permit cross-jurisdiction issuance and trading of equity shares of Indian companies on IFSC exchanges.

Presently, both the LEAP Rules as well as NDI Rules have notified International Financial Services Centre in India (‘Gift City’) as the permissible jurisdiction and India International Exchange and NSE International Exchange as the permissible stock exchange. International Financial Services Centres Authority (‘IFSCA’) had issued the IFSCA (Issuance and Listing of Securities) Regulations, 2021 effective July 19, 2021 (‘IFSC Regulations’) however, in the absence of enabling provision under CA, 2013 and NDI Rules, Indian companies were unable to undertake listing of securities abroad.

In this article we provide an overview of the regulatory regime and deal with the procedural aspect.

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FPIs – Synoptic Overview

Prapti Kanakia and Heta Mehta |

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Our Resources on the topic:-

  1. FPIs with single corporate group concentration to disclose beneficial ownership
  2. Familiar with FEMA (YouTube series)
  3. Investment window for FPIs widened
  4. Introduction to FEMA & FEMA (NDI) Rules, 2019

External Commercial Borrowings

– Vinita Nair, Senior Partner |

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Related Resources

  1. Revised ODI Norms: A step towards greater clarity & liberalization?
  2. Regulatory framework for Overseas Investments
  3. Lost in Layers: lower threshold for subsidiaries under ODI norms raises concern
  4. Ministry of Finance notifies FEM (Non-Debt Instruments) (Amendment) Rules, 2022

Finance Companies / Units in International Financial Services Centre (IFSC)

– Anirudh Grover, Executive |

Table of Contents

BackgroundIFSCA Framework for Finance Companies / Units Implications under FEMA
What are Finance Companies and Finance Units?Registration RequirementsAsset Side Transactions
What does a finance company/unit do?Owned Funds requirementCapital and Liabilities Side Transactions
Can they accept deposits?Corporate Governance AspectsDifference between Finance Company / Unit & NBFCs
Liquidity Risk Management (LRM) FrameworkConclusion


International Finance Service Centre (IFSC) is a designated zone physically situated in India but is not considered a part of India. As the name suggests, it is a designated centre set up for the purpose of enabling international financial services, the key word here being international. The purpose is not only to bring global funds into the country but also facilitate such transactions through this zone which otherwise would have been carried out by foreign branches of domestic entities. This purpose is intended to be achieved through establishment of various businesses such as banking units, fund management entities, finance companies etc. We have discussed in depth about the concept of IFSCs along with the applicability of the domestic regulatory framework in our write-up Financial entities in IFSC: A primer.

The objective of this paper is to picture a comprehensive image of all the aspects of finance entities starting from what is meant by finance companies to all the regulatory exposure it has to bear while undertaking any kind of activities.

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Financial entities in IFSC: A primer

– Parth Ved, Executive |

Table of contents

BackgroundApplicability of Domestic Regulatory framework Regulatory framework in IFSC
What is IFSC?Companies Act, 2013IFSCA (Finance Company) Regulations, 2021
Purpose of setting up an IFSC Foreign Exchange Management Act, 1999Specific Frameworks for Aircraft Leasing and Ship Leasing
Who regulates IFSC?Income tax act, 1961IFSCA (Fund Management) Regulations, 2022
Is IFSC and GIFT City the same? Goods and Services TaxIFSCA (Banking) Regulations, 2020
Permission for setting up an entity in IFSCStamp dutyClosing remarks
Securities lawRelevant Links
Banking law


Flow of funds, just like a river, not only enriches its destination but also benefits all the stops it passes through. Having a financial hub, a stopover which enables routing billions and billions of global funds on a daily basis can definitely prove resourceful. London, New York, Singapore are some of the globally recognised financial centres, and needless to say these locations are at the forefront of financial development. India too has tried to tap into this with the setting up of GIFT-IFSC in Gujarat, and has tried to position itself as the next big global hub for financial transactions.

Through this write-up, the author tries to explain the concept of International Financial Services Centre and the applicability of domestic regulatory framework on entities set up therein.

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Lost in Layers: lower threshold for subsidiaries under ODI norms raises concern

Vinita Nair, Senior Partner | Vinod Kothari & Company |

It is quite common for entities to have subsidiaries in India and outside India in order to undertake business activities. The norms for incorporating a subsidiary in India is mainly governed by provisions of Companies Act, 2013 (‘CA, 2013’) and also the FDI norms for investment in the non-debt instruments, where the investment is being made by a person resident outside India. Similarly, the norms for incorporating a subsidiary outside India is mainly governed by provisions of CA, 2013 and also ODI norms for investment in the non-debt instruments. Additionally, there is a concept of restriction on layers of subsidiaries, prescribed under CA, 2013 and also under the new regime, which has raised cause of concern as well as confusion among India Inc., which is intended to be addressed by the author in this article. 

RBI, effective from August 22, 2022 notified norms on Overseas Investment (‘OI’) in the form of OI Rules, OI Regulations and OI Directions. Read our article on the overview of the OI norms here. Our presentation can be accessed here.

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MCA amends format of Forms SH-4 and PAS-4 to insert declaration on compliance with Government approval requirement under FEMA

Changes in ECB and Trade Credits Policy due to LIBOR Transition

– Team Finserv (

Relevant links:

  1. RBI Circular dated December 8, 2021 –
  2. Master Direction – ECB, Trade Credits and Structured Obligations –
  3. Roadmap for LIBOR Transition –

Our write-ups on financial interests –

SPACs – Value Proposition & Regulatory Framework

– Megha Mittal


The concept of Special Purpose Acquisition Companies (‘SPACs’) has gained significant attention and importance in India in recent times – from a subject preserved to select classes, the surge in transactions over 2020, has made it pave its way to every investor’s dictionary. And with all the spotlight that SPACs have attracted, the numbers seem to only lend to the hype. To begin with, the global SPAC IPO proceeds in 2020 alone is estimated to be $83 billion USD[1] with a total of 251 listings. This figure is further projected to grow to a massive 711 listings in 2021 with an average IPO size of USD 294.5 Million as on 15th August, 2021[2].

Globally, SPACs have become the investment vehicle of choice, more-so by startups looking for funding; and the US has been the flag bearer of the SPAC industry, leading from the front. Following shortly behind are economies like UK, Malaysia and Canada; and while India is playing catch-up, it seems to be speeding up quick enough, at least on the regulatory front.

For the uninitiated, a SPAC, often referred to as a Blank-check Company or a Shell Company, is a non-operating company with the admitted intent (read: special purpose) of acquiring of a potential target within a stipulated timeline[3].

In this article, while dealing with the basic regulatory framework via-a-vis SPACs, the author seeks to analyse the motivation(s) behind such transactions from all perspectives – the acquirer’s, the acquiree’s and the investors’.

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RBI aligns list of compoundable contraventions under FEMA with NDI Rules

‘Technical’ contravention subject to minimum compoundable amount, format for public disclosure of compounding orders revised.

– CS Burhanuddin Dohadwala |


Compounding refers to the process of voluntarily admitting the contravention, pleading guilty and seeking redressal. It provides comfort to any person who contravenes any provisions of FEMA, 1999 [except section 3(a) of the Act] by minimizing transaction costs. Reserve Bank of India (‘RBI’) is empowered to compound any contraventions as defined under section 13 of FEMA, 1999 (‘the Act’) except the contravention under section 3(a) of the Act in the manner provided under Foreign Exchange (Compounding Proceedings) Rules, 2000. Provisions relating to compounding is updated in the RBI Master Direction-Compounding of Contraventions under FEMA, 1999[1].

Following are few advantages of compounding of offences:

  1. Short cut method to avoid litigation;
  2. No further proceeding will be initiated;
  3. Minimize litigation and reduces the burden of judiciary;

Present Circular

Pursuant to the supersession of FEM (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2017[2] (‘TISPRO”)and issuance of FEM (Non-Debt Instrument) Rules, 2019[3] [‘NDI Rules] and FEM (Mode of Payment and Reporting of Non-Debt Instruments) Regulations, 2019[4] [‘MPR Regulations’], RBI has updated the reference of the erstwhile regulations in line with the NDI Rules and MPR Regulations vide RBI Circular No.06 dated November 17, 2020[5] (‘Nov 2020 Circular’).

Additionally, the Nov 2020 Circular does away with the classification of a contravention as ‘technical’, as discussed later in the article.

Lastly, the Nov 2020 Circular modifies the format in which the compounding orders will be published on RBI’s website.

Compounding of contraventions relating to foreign investment

The power to compound contraventions under TISPRO delegated to the Regional Offices/ Sub Offices of the RBI has been aligned with corresponding provisions under NDI Rules and MPR Regulation as under:

Compounding of contraventions under NDI Rules
Rule No.Deals withCorresponding regulation under TISPROBrief Description of Contravention
Rule 2(k) read with Rule 5Permission for making investment by a person resident outside India;Regulation 5Issue of ineligible instruments
Rule 21Pricing guidelines;Paragraph 5 of Schedule IViolation of pricing guidelines for issue of shares.
Paragraph 3 (b) of Schedule ISectoral Caps;Paragraph 2 or 3 of Schedule IIssue of shares without approval of RBI or Government respectively, wherever required.
Rule 4Restriction on receiving investment;Regulation 4Receiving investment in India from non-resident or taking on record transfer of shares by investee company.
Rule 9(4)Transfer by way of gift to PROI by PRII of equity instruments or units of an Indian company on a non- repatriation basis with the prior approval of the Reserve Bank.Regulation 10(5)Gift of capital instruments by a person resident in India to a person resident outside India without seeking prior approval of the Reserve Bank of India.
Rule 13(3)Transfer by way of gift to PROI by NRI or OCI of equity instruments or units of an Indian company on a non- repatriation basis with the prior approval of the Reserve Bank.


Compounding of contraventions under MPR Regulations
Regulation No.Deals WithCorresponding regulation under TISPROBrief Description of Contravention
Regulation 3.1(I)(A)Inward remittance from abroad through banking channels;Regulation 13.1(1)Delay in reporting inward remittance received for issue of shares.
Regulation 4(1)Form Foreign Currency-Gross Provisional Return (FC-GPR);Regulation 13.1(2)Delay in filing form FC (GPR) after issue of shares.
Regulation 4(2)Annual Return on Foreign Liabilities and Assets (FLA);Regulation 13.1(3)Delay in filing the Annual Return on Foreign Liabilities and Assets (FLA).
Regulation 4(3)Form Foreign Currency-Transfer of Shares (FC-TRS);Regulation 13.1(4)Delay in submission of form FC-TRS on transfer of shares from Resident to Non-Resident or from Non-resident to Resident.
Regulation 4(6)Form LLP (I);Regulations 13.1(7) and 13.1(8)Delay in reporting receipt of amount of consideration for capital contribution and acquisition of profit shares by Limited Liability Partnerships (LLPs)/ delay in reporting disinvestment / transfer of capital contribution or profit share between a resident and a non-resident (or vice-versa) in case of LLPs.
Regulation 4(7)Form LLP (II);
Regulation 4(11)Downstream InvestmentRegulation 13.1(11)Delay in reporting the downstream investment made by an Indian entity or an investment vehicle in another Indian entity (which is considered as indirect foreign investment for the investee Indian entity in terms of these regulations), to Secretariat for Industrial Assistance, DIPP.

Technical contraventions to be compounded with minimal compounding amount

As per RBI’s FAQs[1] whenever a contravention is identified by RBI or brought to its notice by the entity involved in contravention by way of a reference other than through the prescribed application for compounding, the Bank will continue to decide (i) whether a contravention is technical and/or minor in nature and, as such, can be dealt with by way of an administrative/ cautionary advice; (ii) whether it is material and, hence, is required to be compounded for which the necessary compounding procedure has to be followed or (iii) whether the issues involved are sensitive / serious in nature and, therefore, need to be referred to the Directorate of Enforcement (DOE). However, once a compounding application is filed by the concerned entity suo moto, admitting the contravention, the same will not be considered as ‘technical’ or ‘minor’ in nature and the compounding process shall be initiated in terms of section 15 (1) of Foreign Exchange Management Act, 1999 read with Rule 9 of Foreign Exchange (Compounding Proceedings) Rules, 2000.

Nov 2020 Circular provides for regularizing such ‘technical’ contraventions by imposing minimal compounding amount as per the compounding matrix[1] and discontinuing the practice of giving administrative/ cautionary advice.

Public disclosure of compounding order

Compounding order by RBI can be accessed at the RBI website-FEMA tab-compounding orders[1]. In partial modification of earlier instructions issued dated May 26, 2016[2] it has been decided that in respect of the Compounding Orders passed on or after March 01, 2020 a summary information, instead of the compounding orders, shall be published on the Bank’s website in the following format:

Sr. No.Name of the ApplicantDetails of contraventions (provisions of the Act/Regulation/Rules compounded)

(Newly inserted)

Date of compounding order

(Newly inserted)

Amount imposed for compounding of contraventionsDownload order


It seems that the compounding order will not be available for download.


The delegation of power is done for enhanced customer service and operational convenience. Revised format of disclosure of compounding orders will be more reader friendly. Delay in filing of forms under MPR Regulations on FIRMS portal is subject to payment of Late Submission Fees (LSF) as per Regulation 5. The payment of LSF is an additional option for regularising reporting delays without undergoing the compounding procedure.

Abbreviations used above:

  • PROI: Person Resident Outside India;
  • PRII: Person Resident In India;
  • NRI: Non-Resident Indian;
  • OCI: Overseas citizen of India;

FIRMS: Foreign Investment Reporting & Management System.

Our other articles/channel can be accessed below:

1. Compounding of Contraventions under FEMA, 1999- RBI delegates further power to Regional Offices:


2. Other articles on FEMA, ODI & ECB may be access below:


3. You Tube Channel:




[1] (Q. 12)