Schemes of Arrangement by Listed Entities and Relaxation under Sub-rule (7) of Rule 19 of the Securities Contracts (Regulation) Rules, 1957
Summary
This circular amends the framework for Schemes of Arrangement by listed entities and relaxations under Rule 19(7) of the Securities Contracts (Regulation) Rules, 1957. It empowers stock exchanges to refer draft schemes to SEBI only after confirming compliance with all applicable laws and regulations. The amendments introduce new requirements for audit committee and independent director reports, valuation standards, and post-approval disclosure obligations.
Text
It has been decided to further streamline the processing of draft schemes filed with the stock exchanges... These amendments are aimed at ensuring that the recognized stock exchanges refer draft schemes to SEBI only upon being fully convinced that the listed entity is in compliance with SEBI Act, Rules, Regulations and circulars issued thereunder.
This Circular shall be applicable for all the schemes filed with the stock exchanges after November 17, 2020. The amendment indicated at Para 7 of the Annexure shall be applicable for all listed entities seeking listing and/or trading approval from the stock exchanges after November 3, 2020.
The recognized stock exchanges are directed to bring the provisions of this circular to the notice of the listed companies and also to disseminate the same on their website.
This circular is issued in exercise of powers conferred by Section 11(1) of the Securities and Exchange Board of India Act, 1992 and Regulations 11, 37 and 94 read with Regulation 101(2) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and Rule 19(7) of Securities Contracts (Regulation) Rules, 1957 to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.
Report from the Audit Committee recommending the Draft Scheme, taking into consideration, interalia, the Valuation Report... The Audit Committee report shall also comment on the following: Need for the merger/demerger/amalgamation/arrangement; Rationale of the scheme; Synergies of business of the entities involved in the scheme; Impact of the scheme on the shareholders. Cost benefit analysis of the scheme.
Report from the Committee of Independent Directors recommending the draft Scheme, taking into consideration, interalia, that the scheme is not detrimental to the shareholders of the listed entity.
All listed entities are required to submit a valuation report from a Registered Valuer. For the purpose of this clause, the Registered Valuer shall be a person, registered as a valuer, having such qualifications and experience and being a member of an organization recognized, as specified in Section 247 of the Companies Act, 2013 read with the applicable Rules issued thereunder.
For the purpose of this clause, the expression “substantially the whole of the undertaking” in any financial year shall mean twenty percent or more of value of the company in terms of consolidated net worth or consolidated total income during previous financial year as specified in Section 180(1)(a)(ii) of the Companies Act, 2013. For the purpose of this clause, the term ‘public’ shall carry the same meaning as defined under Rule 2 of Securities Contracts (Regulation) Rules, 1957.
Stock Exchanges shall provide the ‘No-Objection’ letter to SEBI on the draft scheme; in co-ordination with each other. SEBI shall issue Comment letter upon receipt of ‘‘No-Objection’ letter from Stock Exchanges having nationwide trading terminals. In other cases, SEBI shall issue Comment letter upon receipt of ‘‘No-Objection’ letter from the Designated Stock Exchange.
The words ‘Observation letter or’ in Para C(1) and Para C(2c) stand deleted.
It shall be ensured that steps for listing of specified securities are completed and trading in securities commences within sixty days of receipt of the order of the Hon’ble High Court/NCLT, simultaneously on all the stock exchanges where the equity shares of the listed entity (or transfer entity) are/were listed.
Before commencement of trading, the transferee entity in addition to disclosing the information in the form of an information document on the website of the stock exchange/s shall also give an advertisement in one English and one Hindi newspaper with nationwide circulation and one regional newspaper with wide circulation at the place where the registered office of the transferee entity is situated, giving following details: [List of items a through w including name, address, capital structure, shareholding pattern, promoter details, financials, risks, litigations, etc.]
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Source: SecMarx — Schemes 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.