Central Government notifies the Depository Receipts Scheme 2014 for facilitating issue of Depository Receipts outside India

We are pleased to release a Regulatory alert summarizes the key provisions of the Depository Receipts Scheme, 2014 (“2014 Scheme”) which was notified by the Central Government with effect from December 15, 2014. With the notification of the 2014 Scheme, the erstwhile provisions dealing with depository receipts in the Foreign Currency Convertible Bonds and Ordinary Shares (Through Depositary Receipt Mechanism) Scheme, 1993 (“1993 Scheme”) stand repealed except to the extent they are relating to foreign currency convertible bonds. With the intention to liberalise the manner of accessing the global capital markets by Indian companies, the 2014 Scheme has made significant revisions in the provisions dealing with issuance of depository receipts. Key changes include permission to issue unsponsored depository receipts, issuance of depository receipts against all types of securities (and not only equity shares), expanding the definition of “Issuer”, “Custodian”, Depository”, etc. The 2014 Scheme is based on the recommendations of the Sahoo Committee, which under the chairmanship of Mr. M.S. Sahoo undertook a comprehensive review of the 1993 Scheme and proposed significant revisions.

The 2014 Scheme effectively modernizes the process for overseas issuance of instruments by Indian companies. It is facilitative in nature, but at the same time contains some restrictions to guard against potential abuse of the mechanism. The provisions of the scheme are yet to be implemented by RBI,  SEBI and MCA. Further, the much needed tax clarity is still missing from the scheme