SEBI Provides Pricing Clarity On Share Issuance To Unlisted Companies 

Listed companies allotting shares to unlisted entities under merger and acquisition (M&A) deals should keep the issue price same as the trading price on the day such schemes received board approvals.

After putting in place stricter norms with respect to deals involving listed and unlisted entities, markets regulator SEBI on Thursday provided more clarity on the pricing front for such transactions. The clarification is for deals where shares are to be issued to a select group of shareholders of unlisted companies under 'scheme of arrangement' such as M&As.

"The 'relevant date' for the purpose of computing pricing shall be the date of board meeting in which the scheme is approved," the Securities and Exchange Board of India (SEBI) said in a circular.

Stock exchanges have been asked to bring the provisions of this circular to the notice of listed entities and also to disseminate the same on their websites.

Earlier this month, SEBI had streamlined regulatory framework for 'scheme of arrangement' by listed firms to check any possible 'bypassing' of norms and prevent companies from seeking direct approval of the National Company Law Tribunal (NCLT) for such deals. The regulator had also 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 would 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.