Sebi eases 'scheme of arrangement' rules for listed companies

Markets regulator Sebi on Wednesday relaxed disclosure, promoters' share lock-in and listing related compliance requirements for listed firms undertaking 'schemes of arrangement' such as mergers and demergers, including those involving subsidiaries and their divisions.

The move is aimed at expediting the processing of draft schemes.

The decision has been taken after Sebi received representations suggesting improvements to the existing regulatory framework, the Securities and Exchange Board of India (Sebi) said in a circular.

The markets watchdog has relaxed certain disclosure requirements. The listed entities are no longer required to submit certain documents to the stock exchanges following the sanction of the scheme by the High Court or National Company Law Tribunal (NCLT).

These documents are copy of the High Court/NCLT approved scheme; result of voting by shareholders for approving the scheme; statement explaining changes, if any, and reasons for such changes carried out in the approved scheme vis-a-vis the draft scheme.

The regulator said that the promoter's shares locked-in can now be transferred 'inter-se' among promoters.

Besides, such locked-in shares can be pledged with any scheduled commercial bank or public financial institution as collateral for loan granted by such bank or institution "if pledge of shares is one of the terms of sanction of the loan".

Under the rules, shares held by promoters up to the extent of 20 per cent of the post-merger paid-up capital of the unlisted issuer, should be locked-in for three years from the date of listing of the shares of the unlisted issuer. Further, the remaining shares should be locked-in for one year.

"No additional lock-in shall be applicable if the post scheme shareholding pattern of the unlisted entity is exactly similar to the shareholding pattern of the listed entity," Sebi said.

Further, Sebi has provided 60 days to listed or transferee entity to list specified securities from the current 45 days.

"It shall be ensured that steps for listing of specified securities are completed and trading in securities commences within 60 days of receipt of the order of the High Court/ NCLT, simultaneously on all the stock exchanges where the equity shares of the listed entity (or transferor entity) are/were listed," the regulator noted.

Before commencement of trading, the transferee entity will have to give an advertisement in one each in a English, Hindi and a regional newspaper with wide circulation with details including pre and post scheme of amalgamation, financial statements of the last three years, details of promoters among others.

"The provisions of this circular shall not apply to schemes which solely provide for merger of a wholly owned subsidiary or its division with the parent company," Sebi noted.