Master Circular on Scheme of Arrangement by Listed Entities and Relaxation under Sub-rule (7) of rule 19 of the Securities Contracts (Regulation) Rules, 1957
Summary
This part introduces a SEBI Master Circular consolidating requirements for schemes of arrangement by listed entities. It establishes that the circular compiles operational circulars and clarifies that original circular content prevails in case of inconsistency. The preliminary section outlines obligations under Listing Regulations 11, 37, and 94, while Part I details pre-NCLT submission requirements including designated stock exchange selection and document submission. This section outlines the specific documents, reports, and certificates required for schemes of arrangement involving listed and unlisted entities. It establishes conditions regarding shareholding patterns, valuation requirements, and auditor certifications to ensure regulatory compliance. Additionally, it mandates disclosure obligations, complaint redressal mechanisms, and penalties for misstatements during the scheme approval process. This section mandates e-voting by public shareholders for schemes of arrangement involving specific promoter-related transactions or substantial asset transfers. It outlines additional compliance conditions for listing Non-Convertible Redeemable Preference Shares and Debentures issued
Text
SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 place obligations with respect to Scheme of Arrangement on Listed Entities and Stock Exchange(s) in Regulation 11, 37 and 94.
Regulation 11 provides that any scheme of arrangement does not violate securities laws; Regulation 37 requires filing draft scheme with Stock Exchange(s) for Observation Letter or No-objection Letter before filing with court or Tribunal.
Sub-rule (7) of rule 19 of the Securities Contracts (Regulation) Rules, 1957 provides that SEBI may waive or relax strict enforcement of listing requirements at its discretion or on Stock Exchange recommendation.
The provisions shall not apply to schemes solely providing for merger of a wholly owned subsidiary or its division with the parent company, though draft schemes must be filed for disclosures.
Issuance of shares under schemes for allotment only to a select group of shareholders or shareholders of unlisted companies shall follow pricing provisions of Chapter V of SEBI (ICDR) Regulations, with relevant date being the Board meeting approval date.
The listed entity shall pay a fee to SEBI at the rate of 0.1% of the paid-up share capital of the listed/ transferee / resulting company, whichever is higher, subject to a cap of ` 5,00,000.
Listed entities shall choose one of the Stock Exchanges having nationwide trading terminals as the designated Stock Exchange for coordinating with SEBI.
For companies listed solely on regional Stock Exchange seeking exemption from Rule 19(2) (b) of SCRR, the listed entity shall obtain in-principle approval for listing of equity shares on any Stock Exchange having nationwide trading terminals.
The Listed entity shall submit the following documents to the Stock Exchanges: Draft Scheme of arrangement/ amalgamation/ merger/ reconstruction/ reduction of capital, etc.; Valuation Report accompanied with an undertaking; Report from the Audit Committee recommending the Draft Scheme.
(d) Fairness opinion by a SEBI Registered merchant banker... (e) Pre and post amalgamation shareholding pattern... (f) Audited financials of last 3 years... (g) Auditor’s Certificate... (h) Detailed Compliance Report... (i) Report from the Committee of Independent Directors... (j) Declaration... on any past defaults... (k) No Objection Certificate (NOC) from the lending scheduled commercial banks/financial institutions/debenture trustees.
The valuation report... shall be provided by a Registered Valuer and Fairness opinion... by Independent SEBI Registered Merchant Banker... shall not be treated as independent in case of existence of any material conflict of interest among themselves or with the company...
The listed entity shall include the applicable information pertaining to the unlisted entity/ies involved in the scheme in the format specified for abridged prospectus... in the explanatory statement or notice or proposal accompanying resolution...
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Source: SecMarx — Master Circular on Scheme of Arrangement by Listed Entities and Relaxation under Sub-rule (7) of rule 19 of the Securities Contracts (Regulation) Rules, 1957. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.