Nse Finalises Norms For Corporate Mergers

The National Stock Exchange (NSE) has finalised norms for the merger of corporate entities at the exchange. In a note circulated to members yesterday, the bourse made it clear that the deposits of the trading member who ceases to exist will be refunded to the merged entity only after the expiry of the respective lock-in period of each of the extinguishing trading members.

It has further said that no interest shall be paid by the exchange or the National Securities Clearing Corporation (NSCCL) on such deposits. However, these deposits may be considered towards networth or capital adequacy requirements of the merged entity. The amount can also be used for margin requirement. Sources say that the bourse has only received five applications for merger to date.

 

The exchange has stipulated that the merged entity shall consist of at least one or more members of the dominant promoter group of the merging trading members who would hold a minimum of 51 per cent of its total paid-up capital. In the case of listed companies, this limit will stand at 40 per cent.

Consequent to the merger, the exchange shall write to the Securities and Exchange Board of India (Sebi), seeking the cancellation of Sebi registration of the extinguishing trading members and grant fresh membership where two or more individual/partnership/corporate members merge to form a new partnership.

The merger among trading members will be permitted under the following terms and conditions:

The dominant promoter group of the merged entity shall comprise of only the dominant members of the merging trading members.

When two or more individual trading members merge to form either a partnership firm or a corporate the dominant group of partners in the emerging trading member shall comprise of any or all such trading member.

In case of merger between two or more individual/partnership firms, resulting in a new partnership or corporate, the dominant group of partners in the emerging firms or corporate shall comprise of any or all the dominant partners of such merging trading members.

The exchange has stated that such merger between trading members shall not be treated as transfer of trading membership.

The contentious issue of signing the indemnity bonds also finds place in the merger norms. The exchange has said that the dominant shareholders of the emerging entity shall have to execute and submit the personal indemnity bonds along with the application for merger.

In case of merger between trading members, resulting in the formation of a new partnership entity or corporate, the new entity so formed shall trade only on Sebi registration as a trading member.

In such case all the merging members shall be disabled from business during the intervening period, if any.