Sebi streamlines 'scheme of arrangement' rules for listed firms

Sebi on Friday streamlined regulatory framework for 'scheme of arrangement' such as merger and acquisitions by listed firms to check any possible 'bypassing' of norms and prevent companies from seeking direct approval of National Company Law Tribunal (NCLT) for such deals.

The decision has been taken in consultation with the stock exchanges and market participants.

Sebi has listed out several documents, such as draft scheme of arrangement, valuation report, report of the audit committee and fairness report by a merchant banker that need to be submitted to the exchanges before filing such schemes with NCLT for sanction.

Besides, listed firms will have to submit pre and post amalgamation shareholding pattern of unlisted entity, audited financial of last three years and redressal of complaints report to the exchanges.

A scheme of arrangement is a court-approved agreement between a company and its shareholders or creditors.

Listed entities, desirous of undertaking scheme of arrangement, will have to file the draft scheme with stock exchange for obtaining 'observation letter' or no-objection letter, before filing such scheme with any court or tribunal.

Further, stock exchanges have to forward their objection/no-objection letter on such scheme to Sebi, which can also review the scheme and issue necessary observations, within three working days.

"Listing regulations provides that any scheme of arrangement/amalgamation/merger/reconstruction/reduction of capital etc to be presented to any court or tribunal does not in any way violate, override or limit the provisions of securities laws or requirements of the stock exchanges," Sebi said in a circular.

Immediately upon filing of the draft scheme of arrangement with bourses, the listed entity will have to disclose such scheme along with all the documents on its website. They will also have to disclose the 'observation letter' of exchanges on its website within 24 hours of receiving it.

The listed entities will have to ensure that the scheme of arrangement, submitted with the NCLT, has provided provision of e-voting by public shareholders after disclosing all material facts in the explanatory statement sent to the shareholders in relation to such resolution.

Upon sanction of the scheme by the High Court/NCLT, the listed entity will have to submit the documents — 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.