SEBI Streamlines Framework For Processing Of Draft Schemes Of Arrangement Filed With Exchanges
The logo of Securities and Exchange Board of India (SEBI) is pictured on the door handle of a corference room at the market regulator hearquarters in Mumbai, India. (Photo: BloombergQuint)

SEBI Streamlines Framework For Processing Of Draft Schemes Of Arrangement Filed With Exchanges

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Markets regulator SEBI streamlined framework for processing of draft schemes pertaining to mergers and demergers filed by listed companies with the stock exchanges.

The changes 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 the regulatory norms, it said in a circular.

The new framework will be applicable for all the schemes filed with the stock exchanges after Nov. 17, 2020.

According to SEBI, stock exchanges will have to provide the 'no-objection' letter to SEBI on the draft scheme in co-ordination with each other.

Further, SEBI will issue comment letter upon receipt of 'no-objection' letter from exchanges having nationwide trading terminals.

Under the norms, listed entities desirous of undertaking a scheme of arrangement file the draft scheme with stock exchange for obtaining no-objection letter, before filing of such scheme with any court or tribunal.

Further, stock exchanges need to forward their objection or no-objection letter to SEBI, which can also review the scheme.

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

Besides, SEBI said valuation report is required to be placed before the audit committee of the listed entity.

The audit committee report can comment on the need for the merger/demerger/amalgamation/arrangement, rationale of the scheme, synergies of business of the entities involved in the scheme, impact of the scheme on the shareholders and cost benefit analysis of the scheme.

SEBI further said listed entities are required to submit a valuation report from a registered valuer.

The regulator said listing and trading of specified securities commences within 60 days of receipt of the order of high court or NCLT simultaneously on all the stock exchanges where the equity shares of the listed entity (or transfer entity) are/were listed. Earlier, this timeline was 45 days.

Before commencement of trading, SEBI said the transferee entity, in addition to disclosing the information in the form of an information document on the website of the exchanges, will have to give an advertisement in newspapers giving details about the business model, reason for the amalgamation and internal risk factors.

In addition, they will have to give details of shareholding of promoter group, group companies, names of its 10 largest shareholders and percentage of shares held by each of them.

Among others, they will have to announce the regulatory action, if any, taken by SEBI or stock exchanges against the promoters in last five financial years; and provide brief details of outstanding criminal proceedings against the promoters.

With regard to the framework on listing, SEBI said the changes will applicable for entities seeking listing and/or trading approval from the stock exchanges after Nov. 3, 2020.

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