Update: The Companies (Amendment) Bill, 2020 has been passed by both houses of the Parliament. It was passed in the Lok Sabha on September 19, and in the Rajya Sabha on September 22. 

Original article follows:

Indian companies could soon be allowed to list abroad on foreign stock exchanges, before having to do so on Indian ones. The Lok Sabha on Saturday passed the Companies (Amendment) Bill, 2020 amending the Companies Act, 2013 with the aim of promoting the ease of doing business in India. The Act is expected to be tabled in the Rajya Sabha during the ongoing Monsoon session of the Parliament.

The context: Currently, Indian companies looking to raise money in international markets cannot do so unless they are listed on an Indian stock exchange. For instance, in 2010 MakeMyTrip incorporated itself in Mauritius to bypass this rule so it could get listed on US-based Nasdaq without ever going public in India.

What changes: The Companies (Amendment) Bill, 2020 allows the Central government to allow certain classes of public companies to list certain types of securities in foreign jurisdictions. The Centre would only allow it in certain “permissible” jurisdictions.

Earlier this month, the Ministry of Corporate Affairs (MCA) was reportedly working on releasing a draft of the norms that would govern overseas listing. Mint had reported that the Ministry could allow direct listing in jurisdictions that have strong anti-money laundering norms, KYC norms and are compliant with Financial Action Task Force (FATF) regulations.

How it could help companies

The amendments are expected to be helpful to several Indian startups looking to raise money from American investors. Some have already put their plans in motion. Last week, Reuters reported that Flipkart was eyeing overseas listing as early as 2021. The Walmart-owned company is reportedly going to choose between the US and Singapore.

Similarly, Policybazaar is considering going public in 2021. In July this year, company co-founder Yashish Dahiya told Bloomberg that Policybazaar had global interest and that the company would consider listing both in India and overseas if existing regulations are tweaked.

Kunal Bahl, CEO of Snapdeal, reacted to the Bill being passed in the Lok Sabha on Twitter: “Permitting unencumbered direct listing of [Indian] companies on foreign stock exchanges will herald an era of [Indian] companies accessing deep capital markets and becoming global champions. Hopefully the Companies Amendment Bill paves the way for a seamless process.”

However, there could some hiccups. Earlier this month, Livemint reported that the new regulations from MCA may include a “dual listing” clause, which would inevitable force companies to list their shares in India as well. The ministry was reportedly considering three options — simultaneous dual listing, listing in India within three years of an overseas public offer and finally, within five years of an overseas listing.

*Correction (September 25, 5:20 PM): An earlier version of the article said the Companies (Amendment) Bill, 2020 was passed in the Lok Sabha on Sunday. This is incorrect, it was passed in Lok Sabha the previous day i.e., Saturday (September 19). Error is regretted.