Scheme of Arrangement under the Companies Act, 1956 – Revised requirements for the Stock Exchanges and Listed Companies
Summary
This circular revises the requirements for stock exchanges and listed companies regarding schemes of arrangement under the Companies Act, 1956. It mandates that listed companies file draft schemes with stock exchanges and obtain audit committee approval before seeking court sanction. The document outlines specific timelines and obligations for stock exchanges to process these drafts and issue observation letters to SEBI. This section mandates the inclusion of a Complaints Report in shareholder notices and its submission to stock exchanges within specific timelines. It requires listed companies to obtain shareholder approval via postal ballot and e-voting, ensuring public support meets a two-to-one threshold. The text further outlines post-sanction document submissions, the six-month validity of observation letters, and transitional applicability rules for pending schemes. This part details the procedural requirements for stock exchanges and listed companies following High Court sanction of a scheme, including submission timelines and documentation. It outlines specific conditions for listing equity shares with differential rights and warrants offered alongside non-convertible deben
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Listed companies desirous of undertaking a Scheme of Arrangement... shall file the Draft Scheme with the stock exchanges in terms of Clause 24(f) of the Listing Agreement. Listed companies shall also submit the documents mentioned in Para 2 of Part A of Annexure I to this Circular to the stock exchanges along with the Draft Scheme.
Such listed companies shall place before its Audit Committee the Valuation Report obtained from an Independent Chartered Accountant. The Audit Committee shall furnish a report recommending the Draft Scheme, taking into consideration, inter alia, the aforementioned valuation report.
Listed companies shall choose one of the stock exchanges having nation-wide trading terminals as the designated stock exchange for the purpose of coordinating with SEBI.
Listed companies shall be required to:- (a) include the Observation Letter of the stock exchanges, referred to in Clause 5.8 below, in the notice sent to the shareholders seeking approval of the Scheme; and (b) bring the same to the notice of the Hon’ble High Court at the time of seeking approval of the Scheme.
The designated stock exchange, upon receipt of the Draft Scheme and the documents referred to in Clause 5.1 above, shall forward the same to SEBI within 3 working days.
The stock exchanges shall process the Draft Scheme (including seeking clarifications from company and/or Opinion from Independent Chartered Accountant.) and forward their “Objection/No-Objection” letter on the Draft Scheme to SEBI.
The stock exchanges shall forward their “Objection/No-Objection” letter on the Draft Scheme to SEBI within 30 days from the date of application or within 7 days of date of receipt of satisfactory reply on clarifications from the company and/or opinion from independent chartered accountant, if any sought by stock exchanges, as applicable.
The stock exchanges, upon receipt of comments from SEBI, as referred to in Clause 5.10 below, shall issue Observation Letter to the listed company after suitably incorporating the comments received from SEBI. Stock exchanges shall provide ‘Observation Letter’ to listed company within 7 days of receipt of comments from SEBI on the Draft Scheme.
Upon receipt of “Objection/No-Objection” letter from the stock exchanges, SEBI shall provide its comments on the Draft Scheme to the stock exchanges. While processing the Draft Scheme, SEBI may seek clarifications from any person relevant in this regard including the listed company or the stock exchanges and may also seek an opinion from an Independent Chartered Accountant.
SEBI shall endeavour to provide its comments on the Draft Scheme to the stock exchanges within 30 days from the later of the following: a. date of receipt of satisfactory reply on clarifications, if any sought from the company by SEBI; or b. date of receipt of opinion from Independent Chartered Accountant, if sought by SEBI; or c. date of receipt of “Objection/No-Objection” letter from the stock exchanges.
Immediately upon filing of the Draft Scheme with the stock exchanges under Clause 5.1 above, the listed company shall disclose the Draft Scheme and all the documents mentioned in Clause 5.1 above on its website. It shall also disclose the Observation Letter of the stock exchanges on its website within 24 hours of receiving the same.
The stock exchanges where the specified securities are listed / proposed to be listed shall also disclose on their websites the Draft Scheme and documents listed at Clause 5.1 above immediately on receipt. It shall also disclose the Observation Letter on its website immediately upon issuance.
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Source: SecMarx — Scheme of Arrangement under the Companies Act, 1956 – Revised requirements for the Stock Exchanges and Listed Companies. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.