Revised Definition of Listed companies

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Revised Definition of Listed Companies

The Ministry of Corporate Affairs (MCA) on February 19, 2021, has issued the Companies (Specification of definitions details) Second Amendment Rules, 2021. With this amendment, MCA has liberalized the definition of listed companies under the Companies Act to provide compliance relief to public companies and private limited companies having listed debt securities. The current article briefs the Companies (Specification of definitions details) Second Amendment Rules, 2021.

The Gist of MCA Notification

The definition under the Companies Act, 2013 for listed companies has now been revised by inserting a new Rule 2A in Companies (Specification of definitions details) Rules, 2014. The new rule 2A specifies conditions to consider companies as listed companies. This new rule shall come into force on April 01, 2021

  • As per the Companies (Specification of definitions details) Second Amendment Rules, 2021, Public companies, which have not listed their equity shares listed but have debt or preference shares listed will not be counted as listed entities.
  • Also, private limited companies with listed debt securities will not be counted as listed entities.

Revised Definition of Listed Companies

Based on the manner of access to capital, companies are categorized as Listed companies and Un-listed companies.

According to the Companies Act, “a listed company means a company that has any of its securities listed on any recognized stock exchange. Provided that such class of companies, which have listed or intend to list such class of securities, as may be prescribed in consultation with the Securities and Exchange Board, shall not be considered as listed companies”

Know more about Dematerialisation in Unlisted Companies

A listed company is a kind of a company whose securities are listed on at least one of the stock exchanges. Such a company must comply with the provisions of the listing.

Unlisted Company

When the securities of a private or public company aren’t listed on any of the stock exchanges, it is an unlisted company. Such companies cannot raise funds from the public at large by issuing a prospectus. However, an unlisted company may issue shares on a Private Placement basis or to raise private equity funding.

Conditions to Consider Public companies as Listed Companies

Public companies, that do not have their equity shares listed but have debt or preference shares listed and are currently counted as listed companies. According to the notification, such companies will no longer be considered listed entities.

  • Public companies which have not listed their equity shares on a recognized stock exchange but have listed their non-convertible debt securities issued on a private placement basis in terms of SEBI (Issue and Listing of Debt Securities) Regulations, 2008 will not be counted as listed entities.
  • Public companies which have not listed their equity shares on a recognized stock exchange but have listed their non-convertible redeemable preference shares issued on a private placement basis in terms of SEBI (Issue and Listing of Non-Convertible Redeemable Preference Shares) Regulations, 2013 will not be counted as listed entities.
  • Public companies which have not listed their equity shares on a recognized stock exchange but have listed their non-convertible debt securities and redeemable preference shares will not be counted as listed entities.
  • 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 will not be considered as listed entities.

Conditions to Consider Private companies as Listed Companies

According to the Companies (Specification of definitions details) Second Amendment Rules, 2021, Private companies which have listed their non-convertible debt securities on a private placement basis on a recognized stock exchange in terms of SEBI (Issue and Listing of Debt Securities) Regulations, 2008 will be kept out of the preview of listed company status.

The official notification pertaining to the Companies (Specification of definitions details) Second Amendment Rules, 2021 is as follows:

CompaniesSpecification2ndAmndtRules_19022021

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Post by Renu Suresh

Renu is experience content writer specialised in compliances and company rules.