The Ministry of Corporate Affairs has permitted companies with negative net worth to list on stock exchanges, subject to 75% allocation of issue size to Qualified Institutional Buyers (QIBs), and revised Form LEAP-1 to include non-equity instruments.
MCA Amends Listing Norms for Companies with Negative Net Worth
The Ministry of Corporate Affairs (MCA) has issued a circular allowing companies with negative net worth to access the listing platform under the LEAP-1 framework, provided that 75% of the issue size is allocated to Qualified Institutional Buyers (QIBs). The move is aimed at enhancing market access for emerging and distressed enterprises seeking capital infusion through the institutional route.
The revised Form LEAP-1 replaces the term 'shares' with 'instruments', thereby expanding eligibility to include debentures and preference shares. This broadens the scope of securities that can be offered under the framework and aligns with the growing trend of hybrid instruments in capital markets.
The amendment reflects regulatory intent to balance investor protection with innovation in fundraising, ensuring institutional oversight through mandatory QIB participation.
Practitioners should note that while放宽 entry norms, the condition of 75% QIB allocation acts as a risk-mitigation mechanism. Legal teams advising pre-IPO companies must scrutinize the revised form and ensure compliance with updated disclosure and investor categorisation norms under SEBI (ICDR) Regulations.
