Company Law Committee (CLC) Recommends SPAC Structures for Indian Markets

  • CLC has submitted Report to the Government, recommending SPAC structure for Indian Companies
  • CLC has studied successful listing of Renew Power
  •  Recommendations will allow India-incorporated SPACs to trade on global markets

The Ministry of Corporate Affairs (MCA) had constituted the Company Law Committee (CLC) for making recommendations to the government for promoting Ease of Doing Business in India and ensuring effective implementation of the Companies Act 2013, Limited Liability Partnership Act, 2008, and related Rules. On 21st March, 2022, CLC has submitted its Report to the Government. CLC recommendations are futuristic and set to strengthen the markets and regulatory architecture in India.

The SPAC structure has been recommended by CLC for Indian companies. Using the successful listing of Renew Power as an example, the Committee has advocated SPAC structure for the Indian Market to encourage entrepreneurship and provide an exit route for investors.

Renew’s listing is clear evidence of Indian companies’ desire to list on global exchanges via the SPAC method. In today’s environment markets are linked and capital is flying freely between different geographies based on the available opportunities and investors interest. When global investors are keen to bet on company based on its future potential than their domestic counterparts, SPAC may be conducive structure as it allows immense flexibility.

The International Financial Services Centres (IFSCs) have also offered regulatory clarity on SPAC listing. The IFSCA Listing Regulations allow SPACs to be listed in the IFSC. SPAC eligibility and other modalities, such as offer timing, disclosure requirements, underwriting, and other related obligations, are governed have been defined by the rule.

It is worth noticing that SEBIS’ Primary Market Advisory Committee (PMAC) has already been entrusted with the task for examining the possibility and suitability of listing SPAC structures in India. SEBI is studying the modalities of introducing framework for regulating SPACs in India. SPACs are currently regulated and recognised in a number of jurisdictions, including the United Kingdom, the United States, Canada, Singapore, and Malaysia. The Committee believed that allowing India-incorporated SPACs to trade on global markets would allow Indian enterprises to operate and do business in these jurisdictions.

From Global experience, not all the SPAC’s have been successful as their have been cases of mis-selling and value erosion post listing. However, SPAC has been innovative way for giving investors a way out while also generating profit for the SPAC’s sponsors. It has been embraced by the markets as it provides flexibility in terms of raising money from the public for downstream investment in unlisted companies and at the same time providing exit to the investors. As of CLC report is recommendatory in nature and MCA have invited comments from the public before adopting it as a regulation. However, street has been unanimous that allowing SPAC listing will further help in creating a vibrant capital market.

Staff Galactik Views

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