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Sebi revises norms for companies seeking scheme of arrangement

Sebi revises norms for companies seeking scheme of arrangement

Market regulator Securities and Exchange Board of India (Sebi) has revised the norms required for publicly traded companies that are planning to list after an amalgamation or a demerger. In the recent past, Sebi said, it has received applications seeking exemption from certain entities where there are inadequate disclosure, convoluted schemes of arrangement and exaggerated valuations, among others.

Sebi has also revised the requirements for bourses.

"Sebi is of the view that granting listing permission or exemption from the requirements of Rule 19(2)(b) of SCRR, 1957 based on such applications may not be in the interest of minority shareholders," it said in a circular yesterday.

"At the same time, if listing permission or such an exemption is delayed or denied, it would add to the
uncertainty and would deprive shareholders of an exit opportunity," it added.

Among others, listed companies shall also include the 'complaint report' in the notice sent to the shareholders while seeking approval of the scheme. The 'complaint report' should be given by the stock exchanges to Sebi before the market regulator communicates its comments on the draft scheme.

Listed companies planning for a scheme of arrangement have to place before the audit committee the valuation report obtained from an independent chartered accountant. "The audit committee shall furnish a report recommending the draft scheme, taking into consideration, inter alia, the aforementioned valuation report," the circular said.

After receiving the draft scheme, the concerned bourse should forward the same to Sebi within three working days. Bourses have to process the draft scheme -- including seeking clarifications from company and/or opinion from an independent chartered accountant -- and forward their 'objection/no-objection' letter to the market regulator.

Upon receipt of 'objection/no-objection' letter from the stock exchanges, Sebi shall provide its comments on the draft scheme to the stock exchanges. Sebi will try to provide its comments on the draft scheme to the stock exchanges within 30 days, subject to certain conditions.

As per existing norms, a listed company should file any scheme/petition, proposed to be filed before any court or tribunal with the stock exchange for approval, at least a month before it is presented to the court or tribunal.

Pursuant to a scheme of reconstruction or amalgamation being sanctioned by a high court under certain sections the Companies Act, listed companies interested in listing their shares after a merger or a demerger were required to seek exemption from Sebi.