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TMI BlogSchemes of Arrangement by Listed Entities and (ii) Relaxation under Sub-rule (7) of rule 19 of the Securities Contracts (Regulation) Rules, 1957X X X X Extracts X X X X X X X X Extracts X X X X ..... king scheme of arrangement or involved in a scheme of arrangement shall file the draft scheme with Stock Exchange(s) for obtaining Observation Letter or No-objection Letter, before filing such scheme with any court or Tribunal. Regulation 94 of the listing regulations requires Stock Exchanges to forward such draft schemes to SEBI in the manner prescribed by SEBI. 3. SEBI Circular No. CIR/CFD/CMD/16/2015 dated November 30, 2015 lays down the detailed requirements to be complied with by listed entities while undertaking schemes of arrangements. 4. Sub-rule (7) of rule 19 of the Securities Contracts (Regulation) Rules, 1957 (hereinafter referred to as "the SCRR") provides that Securities and Exchange Board of India (SEBI) may, at its own discretion or on the recommendation of a recognised Stock Exchange, waive or relax the strict enforcement of any or all of the requirements with respect to listing prescribed by these rules. 5. In consultation with the stock exchanges and market participants, it has been decided to revise the regulatory framework for such schemes of arrangement. Certain regulations as mentioned in this circular have been amended. The details of revised requirements ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... change (a) Listed entities shall choose one of the Stock Exchanges having nationwide trading terminals as the designated Stock Exchange for the purpose of coordinating with SEBI. (b) For companies listed solely on regional Stock Exchange, wherein exemption from Rule 19(2) (b) of Securities Contracts (Regulation) Rules, 1957 is sought, the listed entity shall obtain in-principle approval for listing of equity shares on any Stock Exchange having nationwide trading terminals. In cases, wherein exemption from Rule 19(2)(b) of Securities Contracts (Regulation) Rules, 1957 is not sought by the listed entity, one of the Stock Exchanges having nationwide trading terminals shall provide a platform for dissemination of information of such Schemes and other documents required under this circular. For such purpose, Stock Exchanges having nationwide trading terminals may charge reasonable fees from such companies. 2. Submission of Documents The Listed entity shall submit the following documents to the Stock Exchanges:- (a) Draft Scheme of arrangement/ amalgamation/ merger/ reconstruction/ reduction of capital, etc.; (b) Valuation Report as per Para (4) below; (c) Report from the Audit Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of this Circular, 'change in the shareholding pattern' shall mean; (i) change in the proportion of shareholding of any of the existing shareholders of the listed entity in the resultant company; or (ii) new shareholder being allotted equity shares of the resultant company; or (iii) existing shareholder exiting the company pursuant to the Scheme of Arrangement (d) Further, a few examples illustrating 'no change in shareholding pattern' are indicated below: (i) In case a listed entity (say, "entity A") demerges a unit and makes it a separate company (say, "entity B"); 1) if the shareholding of entity B is comprised only of the shareholders of entity A; and 2) if the shareholding pattern of entity B is the same as in entity A; and 3) every shareholder in entity B holds equity shares in the same proportion as held in entity A before the demerger (ii) In case a wholly-owned-subsidiary (say, "entity X") of a listed entity is merged with its parent listed entity (say, "entity Y"), where the shareholders and the shareholding pattern of entity Y remains the same, it will be treated as 'no change in shareholding pattern'. For the limit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esolution sent to shareholders for seeking approval of scheme (a) The Listed entity shall include the Observation Letter of the Stock Exchanges, in the explanatory statement or notice or proposal accompanying resolution to be passed sent to the shareholders seeking approval of the Scheme. (b) The listed entity shall ensure that in the explanatory statement or notice or proposal accompanying resolution to be passed, it shall disclose the pre and post-arrangement or amalgamation, expected capital structure and shareholding pattern, and the "fairness opinion" obtained from a merchant bankers on valuation of assets / shares done by the independent chartered accountant for the listed entity and unlisted entity. (c) The Listed entity shall upload the 'Report on Complaints' as provided in Para 6 (b) and the 'Compliance Report' as provided in Para 2 (h) above, on the company's website and websites of Stock Exchanges. 9. Approval of Shareholders to Scheme through e- Voting: (a) The Listed entities shall ensure that the Scheme of Arrangement submitted with the NCLT for sanction, provides for voting by public shareholders through e-voting, after disclosure of all material facts in the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertified by the auditor and duly approved by the Board of the company, clearly stating the reasons for non-applicability of para (9) (a) above. (d) The undertaking as referred to in Para (9)(c) above shall be displayed on the websites of Stock Exchanges and the listed entity along with other documents submitted, as stipulated under Para (2) above. (e) Any misstatement or furnishing of false information with regard to the said undertaking would be viewed seriously and liable for punitive action as per the provisions of applicable laws and regulations. 10. Subsequent to filing the draft scheme with SEBI, no changes to the draft scheme, except those mandated by the regulators / authorities / tribunal shall be made without specific written consent of SEBI. B. Obligations of Stock Exchange(s) 1. The designated Stock Exchange, upon receipt of the Draft Scheme of Arrangement and documents referred to at para (A) (2) above shall forward the same to SEBI within three working days. 2. The 'Report on Complaints' shall be forwarded by the Stock Exchanges to SEBI before SEBI communicates its comments on the Draft Scheme to the Stock Exchanges. Such Report shall be submitted as per the for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he listed entity shall submit the documents mentioned below to the Stock Exchanges:- (a) Copy of the High Court/ NCLT approved Scheme; (b) Result of voting by shareholders for approving the Scheme; (c) Statement explaining changes, if any, and reasons for such changes carried out in the Approved Scheme of arrangement vis-à-vis the Draft Scheme of arrangement (d) Status of compliance with the Observation Letter or No Objection Letter of the Stock Exchange(s) (e) The application seeking exemption from Rule 19(2)(b) of SCRR, 1957, wherever applicable; and (f) Report on Complaints as per Annexure III of this Circular. III. Application for relaxation under Sub-rule (7) of rule 19 of the Securities Contracts (Regulation) Rules, 1957 A. Requirements to be fulfilled by Listed Entity for Listing of Equity Shares 1. Eligibility conditions for companies seeking relaxation under sub-rule (7) of rule 19 of the Securities Contracts (Regulation) Rules, 1957 A listed issuer may submit the Draft Scheme of arrangement under sub-rule (7) of rule 19 of the Securities Contracts (Regulation) Rules, 1957, thereby seeking relaxation from the strict enforcement of clause (b) to sub-r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tees have been entered as beneficial owners in the records of the depositories pursuant to the Scheme or share certificates have been dispatched to the allottees. 3. In case of a scheme involving hiving-off of a division from a listed entity into an unlisted entity the entire pre-scheme share capital of the unlisted issuer seeking listing shall be locked in as follows: (a) Shares held by Promoters up to the extent of twenty percent of the post-merger paid-up capital of the unlisted issuer, shall be locked-in for a period of three years from the date of listing of the shares of the unlisted issuer; (b) The remaining shares shall be locked-in for a period of one year from the date of listing of the shares of the unlisted issuer. (c) No additional lock-in shall be applicable if the post scheme shareholding pattern of the unlisted entity is exactly similar to the shareholding pattern of the listed entity. 4. The listed entity and/or transferee entity (unlisted entity), as applicable, shall ensure that it has completed steps for listing of its specified securities, within thirty days of the receipt of the order of the Hon'ble High Court/ NCLT sanctioning the Scheme, simultaneous ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of such equity shares, may make an application to the Board under sub-rule (7) of rule 19 of the SCRR seeking relaxation from strict enforcement of clause (b) to sub-rule (2) of rule 19 thereof if it satisfies the following conditions: (a) such equity shares are issued to all the existing shareholders as on record date by way of rights or bonus issue; (b) the issuer is in compliance with the conditions of minimum public shareholding requirement stipulated in regulation 38 of Listing Regulation, with reference to the equity shares already listed and the equity shares with differential rights proposed to be listed; and (c) the issuer undertakes to disclose the shareholding pattern of the equity shares with differential rights separately in terms of requirements of regulation 31 of listing regulations. C. Application by a listed entity for Listing of warrants Offered Along With Non-Convertible Debentures (NCDs): A listed entity, desirous of listing of its warrants without making an initial public offer of warrants, may make an application to the Board under sub-Rule (7) of rule 19 of the SCRR seeking relaxation from strict enforcement of clause (b) to sub-rule (2) of rule 19 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the applicable Accounting Standards notified under the Companies Act, 1956/ Companies Act, 2013 and Other Generally Accepted Accounting Principles. The responsibility for the preparation of the Draft Scheme and its compliance with the relevant laws and regulations, including the applicable Accounting Standards as aforesaid, is that of the Board of Directors of the Companies involved. Our responsibility is to examine and report whether the Draft Scheme complies with the applicable Accounting Standards and Other Generally Accepted Accounting Principles. Nothing contained in this Certificate, nor anything said or done in the course of, or in connection with the services that are subject to this Certificate, will extend any duty of care that we may have in our capacity of the statutory auditors of any financial statements of the Company. We carried out our examination in accordance with the Guidance Note on Audit Reports and Certificates for Special Purposes, issued by the Institute of Chartered Accountants of India. Based on our examination and according to the information and explanations given to us, we confirm that the accounting treatment contained in the aforesaid scheme is i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in any way violate, override or limit the provisions of securities laws or requirements of the Stock Exchange(s) and the same is in compliance with the applicable provisions of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and this circular, including the following:
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Reference
Particulars
1
Regulations 17 to 27 of LODR Regulations
Corporate governance requirements
2
Regulation 11 of LODR Regulations
Compliance with securities laws
Requirements of this circular
(a)
Para (I)(A)(2)
Submission of documents to Stock Exchanges
(b)
Para (I)(A)(2)
Conditions for schemes of arrangement involving unlisted entities
(c)
Para (I)(A)(4) (a)
Submission of Valuation Report
(d)
Para (I)(A)(5)
Auditors certificate regarding compliance with Accounting Standards
(e)
Para (I)(A)(9)
Provision of approval of public shareholders through e-voting
Company Secretary
Managing Director
Certified that the transactions / accounting treatment provided in the draft scheme of arrangement involving (Name of the entities) are in compliance with all the Accounting Standards applicable to a listed entity.
Chief Financial Officer
Managing Director X X X X Extracts X X X X X X X X Extracts X X X X
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