MCA has issued “Companies (Specification of Definition details) Second Amendment Rules, 2021 dated 19th February 2021. Through these rules MCA has changed the definition of ‘Listed Company’ in Section 2(52) of Companies Act, 2013.
However, An enabling provision to do this was introduced in the Companies Act last year by way of an amendment but the classes of companies that get the benefit are being specified through this notification.
Purpose of Amendment:
The ministry of corporate affairs has liberalized the definition of listed companies under the Companies Act to give compliance relief to public limited companies and private limited companies having listed debt securities.
Definition of Listed Company before these amendment Rules:
“Listed Company” means a company which has any of its securities listed on any recognized stock exchange.
These rules came into effect from 1st April 2021.
New Rule 2A has been added after Rule 2 in Companies (Specification of Definition details) Rules, 2014.
Extract of Rule 2A:
[2A. Companies not to be considered as listed companies.-
For the purpose of the proviso to clause (52) of section 2 of the Act, the following classes of companies shall not be considered as listed companies, namely:-
(a) Public companies which have not listed their equity shares on a recognized stock exchange but have listed their –
(i) non-convertible debt securities issued on private placement basis in terms of SEBI (Issue and Listing of Debt Securities) Regulations, 2008; or
(ii) non-convertible redeemable preference shares issued on private placement basis in terms of SEBI (Issue and Listing of Non-Convertible Redeemable Preference Shares) Regulations, 2013; or
(b) Private companies which have listed their non-convertible debt securities on private placement basis on a recognized stock exchange in terms of SEBI (Issue and Listing of Debt Securities) Regulations, 2008;
(c) Public companies which have not listed their equity shares on a recognized stock exchange but whose equity shares are listed on a stock exchange in a jurisdiction as specified in sub-section (3) of section 23 of the Act. ]
Section 23(3) Such class of public companies may issue such class of securities for the purposes of listing on permitted stock exchanges in permissible foreign jurisdictions or such other jurisdictions, as may be prescribed.
Benefits of Amendment in Definition of Listed Company:
- No need of e-voting in General Meeting. (Section 108)
- No need to have website.
- No need to report of AGM in MGT-15. (Section 121)
- No need of Secretarial Audit (upto certain Limit)
- No need of Woman Director (upto certain Limit)
- No need of Secretarial Audit (upto certain Limit); etc.
Public companies, that do not have their equity shares listed but have debt or preference shares listed and are currently counted as listed companies, will no longer be considered listed entities, according to the notification. Also, private limited companies with listed debt securities will not be counted as listed entities.
The central government has been following the approach of reducing the rigors of compliance in genuine cases, while stepping up the disclosure requirement and technology deployment for compliance management.
Author – CS Divesh Goyal, GOYAL DIVESH & ASSOCIATES Company Secretary in Practice from Delhi and can be contacted at firstname.lastname@example.org).
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