Tribunal Approves Scheme for Broadcasting & Cable Businesses, Ensures Shareholder Value

The Tribunal sanctioned the Composite Scheme of Arrangement under Sections 230-232 of the Companies Act, 2013, involving Broadcasting Business and Cable Distribution Business. The Scheme, approved by the Boards of both companies and stakeholders, aimed to unlock shareholder value and provide growth opportunities. All statutory compliances were met, and the Scheme was found beneficial without adverse effects on shareholders, employees, or creditors. Directions were given for asset transfers, legal proceedings, and employee continuity. The order did not exempt payment of Stamp Duty or taxes, and legal fees for the Regional Director were quantified and directed to be paid by the Resulting Company.

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Issues:
Sanction of Composite Scheme of Arrangement under Sections 230-232 of the Companies Act, 2013.

Analysis:
The Petitioner Companies filed a joint application seeking approval for a Composite Scheme of Arrangement involving two distinct lines of business: Broadcasting Business and Cable Distribution Business. The rationale behind the scheme included the need for different management approaches due to distinct risks and competition in each business segment. The separation aimed to unlock significant value for shareholders and provide access to varied funding sources for rapid growth. The Scheme did not adversely affect shareholders, employees, or creditors of the Demerged Company.

The Board of Directors of both the Demerged and Resulting Companies unanimously approved the Scheme. Detailed lists of Equity Shareholders, Secured Creditors, and Unsecured Creditors for both companies were provided. Consent for the Scheme was obtained from all relevant stakeholders through affidavits. Meetings of shareholders and creditors were dispensed with as per Tribunal orders.

Notices were served to relevant authorities and compliance affidavits were filed. The Regional Director expressed no objection to the proposed Scheme. Observations from the Central Government highlighted procedural clarifications and requested consideration subject to those observations. Despite public notice, no opposition was received, indicating general acceptance of the proposed arrangement.

The Tribunal found that all statutory compliances were met, and therefore, sanctioned the Scheme of Arrangement. The order included directions for the transfer of assets, liabilities, legal proceedings, and employee continuity between the companies. It was clarified that the order did not exempt payment of Stamp Duty or taxes. Legal fees for the Regional Director were quantified and directed to be paid by the Resulting Company within a specified timeframe.

Filing and issuance of orders were dispensed with, and concerned authorities were instructed to act on authenticated copies. The Petitioner Companies were directed to lodge copies of the order and Scheme for stamp duty adjudication and filing with the Registrar of Companies within specified timelines. The joint Company Petition was allowed, and the matter was disposed of in accordance with the directions provided.

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