Sebi tweaks guidelines for processing of draft schemes filed with exchanges

Sebi on Thursday clarified on guidelines for processing of draft schemes pertaining to mergers and demergers filed by listed companies with the stock exchanges.

Under the rule, listed entities desirous of undertaking a scheme of arrangement are required to submit certain documents to the exchanges.

Listed entities will be required to submit no objection certificate (NOC) from the lending scheduled commercial banks/financial institutions as well as debenture trustees, Sebi said in circular issued on Thursday.

This circular is an addendum to the one issued on Tuesday.

On Tuesday, the regulator said that such entities will be required to submit NOC from the lending scheduled commercial banks or financial institutions.

Apart from this, the listed entities are required to submit certain documents to the exchange, which includes a valuation report.

As per the revised guidelines, this report needs to be accompanied by an undertaking from the listed entity, stating that no material event impacting the valuation has occurred during the intervening period of filing the scheme documents with exchange and period under consideration for valuation.

"These amendments are aimed at ensuring that the recognised stock exchanges refer draft schemes to Sebi only upon being fully convinced that the listed entity is in compliance with Sebi Act, Rules, Regulations and circulars," Sebi said.

Besides, the entities need to submit a declaration on any past defaults of listed debt obligations of the entities forming part of the scheme.

"The fractional entitlements, if any, shall be aggregated and held by the trust, nominated by the Board in that behalf, who shall sell such shares in the market at such price, within a period of 90 days from the date of allotment of shares, as per the draft scheme submitted to Sebi," the regulator noted.

The listed company has to submit a report from its audit committee and the independent directors certifying that the listed entity has compensated the eligible shareholders.

Both the reports will be submitted within 7 days of compensating the shareholders. Sebi has also asked the exchange to ensure compliance with the guidelines and the non-compliance, if any, has to be submitted to the regulator on a quarterly basis.

Any misstatement or furnishing of false information will make the listed entity liable for punitive action. The guidelines will be applicable for all the schemes filed with the stock exchanges from the date of the circular.

There are certain requirements that need to be fulfilled before the scheme of arrangement is submitted for sanction by the National Company Law Tribunal. This includes that listed entities choose one of the stock exchanges having nationwide trading terminals as the designated stock exchange to coordinate with Sebi.

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