Scheme of Arrangement under the Companies Act, 1956 – Revised requirements for the Stock Exchanges and Listed Companies - Clarification

CIR/CFD/DIL/8/2013 · 2013-05-21 · SEBI

Summary

This SEBI circular clarifies and modifies requirements for listed companies undertaking a Scheme of Arrangement under the Companies Act, 1956. It mandates valuation reports from independent chartered accountants unless there is no change in shareholding patterns. Additionally, it specifies designated stock exchanges for coordination and imposes strict voting and disclosure rules for schemes involving promoters or related parties.

Text

SEBI Circular No. CIR/CFD/DIL/5/2013 dated February 4, 2013 is applicable to all listed companies undertaking a Scheme of Arrangement under Part IV and Chapter V of Part VI of the Companies Act, 1956, (Amalgamation/ Merger/ Reconstruction/ Reduction Of Capital, etc.)

Thus, it is hereby clarified that the Circular referred to in paragraph 3.1 above and this Circular are applicable even to cases where no exemption from Rule 19(2)(b) of Securities Contracts (Regulation) Rules, 1957 is sought from SEBI.

All listed companies undertaking a Scheme of Arrangement under Part IV and Chapter V of Part VI of the Companies Act, 1956, (Amalgamation/ Merger/ Reconstruction/ Reduction Of Capital, etc.) are required to submit a valuation report in terms of Para (I) (A) read with Part A, Annexure I of the SEBI Circular No. CIR/CFD/DIL/5/2013 dated February 4, 2013.

However, 'Valuation Report from an Independent Chartered Accountant' need not be required in cases where there is no change in the shareholding pattern of the listed company / resultant company.

For the limited purpose of this Circular, 'change in the shareholding pattern' shall mean; (a) change in the proportion of shareholding of any of the existing shareholders of the listed company in the resultant company; or (b) new shareholder being allotted equity shares of the resultant company; or (c) existing shareholder exiting the company pursuant to the Scheme of Arrangement

Further, a few examples meaning 'no change in shareholding pattern' are illustrated below: i. In case a listed entity demerges a unit... if the shareholding pattern of entity B is the same as in entity A... ii. In case a wholly-owned-subsidiary... is merged with the parent listed company... where the shareholders and the shareholding pattern of entity Y remains the same

In all other cases, 'Valuation Report from an Independent Chartered Accountant' shall be required.

For the limited purpose of this Circular, 'resultant company' shall mean a company arising / remaining after the listed company undertakes a Scheme of Arrangement.

If a company is listed on any stock exchange having nationwide terminals and/or regional stock exchange, it shall choose the stock exchange having nation-wide trading terminals as the designated stock exchange for the purpose of coordinating with SEBI.

For companies listed solely on regional stock exchange, wherein exemption from Rule 19(2)(b) of Securities Contracts (Regulation) Rules, 1957 is sought, the company shall obtain in-principle approval for listing of equity shares on any stock exchange having nationwide trading terminals.

For companies listed solely on regional stock exchange, wherein exemption from Rule 19(2)(b) of Securities Contracts (Regulation) Rules, 1957 is not sought by the company, One of the stock exchanges having nationwide trading terminals shall provide a platform for dissemination of information of such Schemes and other documents required under the SEBI Circular No. CIR/CFD/DIL/5/2013 dated February 4, 2013.

Date of receipt of copy of in-principle approval for listing of equity shares of the company seeking exemption from Rule 19(2)(b) of Securities Contracts (Regulation) Rules, 1957 on designated stock exchange, in case the company is listed solely on regional stock exchange.

Source: SecMarx — Scheme of Arrangement under the Companies Act, 1956 – Revised requirements for the Stock Exchanges and Listed Companies - Clarification. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.