MCA: Sets negative net worth listing route, 75% QIB condition

The Ministry of Corporate Affairs (MCA) has notified a conditional listing route for companies with negative net worth: an issuer must undertake to allot at least 75 per cent of its net offer to qualified institutional buyers. Notification G.S.R. 968(E), dated 3 November 2026, makes that eligibility subject to regulations framed by the relevant securities market regulator in the permissible jurisdiction.

The notification also expands the securities covered by the rules beyond equity shares, shortens the waiting period after certain payment defaults have been remedied, and changes the treatment of overdue corporate filings. It expressly addresses unlisted public companies within International Financial Services Centres (IFSCs), subject to the International Financial Services Centres Authority Act, 2019, and regulations made under it.

Named the Companies (Listing of equity instruments in permissible jurisdictions) Amendment Rules, 2026, the amendments take effect on publication in the Official Gazette, according to the ministry’s notification.

Institutional allocation replaces an outright exclusion

The change to Rule 5(d) creates an exception to the negative-net-worth restriction. The Press Information Bureau’s FAQs on Direct Listing Scheme, describing the earlier framework, listed negative net worth as a condition that made a company ineligible to issue equity shares for listing under these rules.

In plain terms, negative net worth means that a company’s net worth calculation falls below zero. The new provision addresses that financial condition specifically; it does not describe an exemption from every other listing requirement.

Under the ministry’s amendment, eligibility depends on an undertaking by the issuer to make the prescribed allocation to qualified institutional buyers, or QIBs – institutional investors qualifying under the applicable regulatory framework. The provision ties the allocation to rules made by the securities market regulator for the relevant permissible jurisdiction.

The percentage applies to the net offer, not to the company’s entire share capital. Nor does the amendment itself approve any company’s issue: its wording establishes conditional eligibility to issue instruments for listing.

This distinction matters because the ministry has inserted a proviso, or exception, into an existing disqualification rather than removed the negative-net-worth clause altogether. The institutional-allocation condition is therefore part of the route by which an otherwise excluded issuer can qualify.

More instruments and an express IFSC provision

The notification replaces the word “shares” with “instruments” throughout the principal rules. It also introduces a definition of “equity instruments” covering equity shares, convertible debentures and preference shares issued by an Indian company.

These are different forms of financing. Equity shares represent ownership; convertible debentures are debt instruments capable of conversion into equity; preference shares carry preferential rights under their terms. The amendment brings all three named categories within the terminology of the MCA rules, rather than retaining a framework expressed only in terms of equity shares.

The ministry has correspondingly replaced “existing shareholders” with “existing holders” at both places where the former expression occurs in Rule 4. That wording accommodates holders of the broader set of instruments.

For IFSC companies, the amendment changes Rule 3’s coverage. It carves public companies in IFSC jurisdictions out of clause (a) and inserts a separate clause covering unlisted public companies in those jurisdictions, insofar as they comply with the IFSCA Act and its regulations.

The PIB’s background FAQs describe an IFSC as an International Financial Services Centre established under the Special Economic Zones Act, 2005. They identify the International Financial Services Centres Authority (IFSCA) as the financial-services regulator for GIFT IFSC. The MCA’s new provision expressly preserves the role of that statutory and regulatory framework.

Shorter wait after payment defaults are cured

The notification makes two further changes to Rule 5, which deals with ineligibility.

For payment defaults, the ministry replaces “two years” with “more than six months” in the proviso to Rule 5(e). The PIB’s FAQs describe the earlier clause as covering defaults on dues to banks, public financial institutions, non-convertible debenture holders and other secured creditors. Under that earlier wording, the exclusion ceased to apply once the company had made good the default and two years had elapsed.

Read with the amendment, the waiting period after remedying such a default becomes more than six months. The requirement to make good the default remains; the change concerns the subsequent elapsed period.

For filing defaults, the ministry adds the words “and such default has not been made good” to Rule 5(g). The PIB’s account of the earlier rule identifies the relevant filings as annual returns under Section 92 and financial statements under Section 137 of the Companies Act, 2013.

The added wording makes an unremedied default part of that disqualification. It distinguishes an outstanding filing failure from one that has subsequently been corrected.

The statutory route and revised prospectus filing

The ministry issued the amendment under Section 23(3), read with Section 469, of the Companies Act, 2013. The Companies (Amendment) Act, 2020, published by the Ministry of Law and Justice, inserted Section 23(3) to enable prescribed classes of public companies to issue prescribed securities for listing on permitted exchanges in permissible foreign or other jurisdictions.

The MCA notification records that the principal listing rules were published on 24 January 2024 and last amended on 3 July 2025. The November amendment changes that rules-based framework; it is not the original creation of the statutory listing power.

Alongside eligibility changes, the ministry has substituted Form LEAP-1, the form for submitting a prospectus – the offer document – to the Registrar. The revised form asks for the dates of securities-regulator or stock-exchange approval and submission of the prospectus to that regulator or exchange.

It also requires information on whether an inspection, investigation or inquiry has been ordered against the company under the Companies Act. Mandatory attachments include the regulator’s or exchange’s approval, acknowledgement of prospectus filing and the prospectus itself.

The revised form requires an authorised company representative’s declaration that the information is correct and complete and that the company has complied with the rules. It also provides for certification by a practising chartered accountant, cost accountant or company secretary, including verification against the company’s original records.