Govt eyes SPAC framework to enable new listing route

NEW DELHI: The government is looking at putting in place a regulatory framework for Special Purpose Acquisition Companies (SPAC) in the statutes to aid the possible listing of Indian companies in the country through this route.

The Company Law Committee, which submitted its report on a fresh set of amendments to the Companies Act, has suggested introduction of enabling provisions in the law to list a SPAC on domestic or international exchanges. ASPAC is a type of company that does not have an operating business and has been formed with the specific objective of acquiring a target company. This allows a shell company to go for an initial public offering (IPO) without commercial activity.

After listing, the SPAC merges with or acquires a target company, allowing it to benefit from such a listing, without having to complete the IPO formalities. The panel has gone on to suggest that the provisions allowing Indian companies to list directly on overseas exchanges should be operationalised.

While Parliament allowed the move, the revenue department has refused to address issues related to taxation. This is holding up the plan, which was seen as a key reform initiative in recent years. The committee pointed out that some Indian companies such as ReNew Power had opted for the SPAC route to list overseas.

Government officials said that the move will require several amendments to the law and there may also be fresh taxation issues, which will need to be addressed. So far, the International Financial Services Centre Authority (IFSCA) has put in place regulations for SPAC listing in GIFT City.

While public comments have been sought on the plan, the ministry of corporate affairs intends to commence discussions with other government agencies, such as the department of economic affairs in the finance ministry. Sebi is examining the possibility of introducing a framework for regulating SPACs in India.

The Company Law Committee has recommended that provisions in the Companies Act should be tweaked to relax the requirement to carry out business before being struck off and providing exit options to the dissenting shareholders of a SPAC if they disagree with the choice of the target company identified.