Executive Summary:
This SEBI circular clarifies the framework for issuing Depository Receipts (DRs), specifically regarding permissible holders. It amends the existing rules to allow NRIs to hold DRs issued through employee benefit schemes, bonus issues, or rights issues. The circular mandates Stock Exchanges and Depositories to update their regulations and inform relevant parties.
Key Points / Main Content:
* **Permissible DR Holders:**
* A permissible DR holder must not be a person resident in India.
* A permissible DR holder must not be a Non-Resident Indian (NRI), except under specific conditions.
* **Exemptions for NRIs:**
* The restriction on NRIs holding DRs does not apply to DRs issued via:
* Share-based employee benefit schemes under SEBI regulations.
* Bonus issues.
* Rights issues.
* NRIs are restricted from subscribing to further DR issues or acquiring more DRs, including those issued before October 10, 2019, except as permitted under the provisos above.
* **Responsibilities and Identification:**
* Permissible holders, including beneficial owners, are responsible for ensuring compliance.
* Listed companies are responsible for identifying NRI holders of DRs issued through employee benefit schemes.
* Listed companies must provide information on these NRI DR holders to the designated depository for monitoring limits.
* **Implementation:**
* Stock Exchanges and Depositories must amend their byelaws, rules, and regulations to implement this circular.
* Stock Exchanges and Depositories must inform issuers, domestic custodians, and disseminate the circular on their websites.
Impact Analysis:
* **Stock Exchanges and Depositories:**
* Impact: Required to update internal rules and regulations to align with the new DR framework.
* Action Required: Amend byelaws, rules, and regulations; notify issuers, domestic custodians, and publish the circular on their websites.
* **Listed Companies:**
* Impact: Need to comply with the revised rules regarding DR issuance to NRIs, especially concerning employee benefit schemes, bonus, and rights issues.
* Action Required: Identify NRI holders of DRs issued via employee benefit schemes and report to the designated depository.
* **Issuers and Domestic Custodians:**
* Impact: Must adhere to the clarified framework for DR issuance and ensure compliance with the regulations.
* Action Required: Ensure compliance with the updated regulations.
* **Non-Resident Indians (NRIs):**
* Impact: Can now hold DRs issued through employee benefit schemes, bonus issues, and rights issues, with restrictions on further acquisitions.
* Action Required: Ensure compliance with the restrictions on subscribing to further DR issues or acquiring more DRs, including those issued before October 10, 2019, except as permitted under the provisos above.
Key Entities Referenced
Securities and Exchange Board of India: Regulatory body issuing the circular.
Depository Receipts: Financial instrument that is the subject of the circular.
Non-Resident Indian: Category of individuals whose investment in Depository Receipts is being regulated.
SEBI Share Based Employee Benefits Regulations 2014: Regulations governing share-based employee benefit schemes.
Prevention of Money Laundering Maintenance of Records Rules, 2005: Rules referenced for the definition of 'Beneficial Owner'.
Stock Exchanges: Entities to whom the circular is addressed and who are responsible for implementation.
Depositories: Entities to whom the circular is addressed and who are responsible for implementation.
Securities and Exchange Board of India Act, 1992: The act under which the circular is issued.
भारतीय प्रततभतू त और तितिमय बोर्ड
Securities and Exchange Board of India
CIRCULAR
SEBI/HO/MRD2/DCAP/CIR/P/2020/243 December 18, 2020
To,
1. All recognized Stock Exchanges
2. All Listed Companies through recognized Stock Exchanges
3. All recognized Depositories
4. All recognized Custodians
Dear Sir / Madam,
Subject: Framework for issue of Depository Receipts - Clarifications
1. SEBI vide its Circular No. SEBI/HO/MRD/DOP1/CIR/P/2019/106 dated October 10,
2019 laid down a Framework for issue of Depository Receipts.
2. Para 2.15 of the said circular specifies the following criteria for Permissible holders of
Depository Receipts:
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.
3. In this regard, based on representations received from market participants, the revised
Para 2.15 of the abovementioned Circular is as under:
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;
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Securities and Exchange Board of India
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).”
4. After Para 2.12, the following shall be inserted as Para 2.12A:
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.”
5. 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.
6. This circular is being issued in exercise of powers conferred under Section 11(1) of
the Securities and Exchange Board of India Act, 1992.
Yours faithfully,
Sudeep Mishra
General Manager
Market Regulation Department
+91-22-26449365
sudeepm@sebi.gov.in
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