Sebi clarifies schemes of arrangement

A scheme of arrangement generally refers to an agreement entered into between the company and its shareholders usually involving a court

The Securities and Exchange Board of India (Sebi) has issued a clarification exempting certain companies from independent valuations for schemes of arrangement. Such exemptions would only be given to companies in which the shareholding pattern didn’t change after the scheme of arrangement, said a circular issued today.

“A 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,” the circular said.

A scheme of arrangement usually refers to an agreement between a company and its shareholders.

Typically, these agreements involve a court and are used to bring about a structural change in the company.

Sebi said schemes of arrangement involving promoters could only be pushed through if the majority of public shareholders agreed to it. “Such schemes shall also provide that the scheme shall be acted upon only if the votes cast by the public shareholders in favour of the proposal are more than the number of votes cast by the public shareholders against it,” it said.

The circular, put up on the Sebi website, was applicable to all listed companies undergoing schemes of arrangement, the circular said.