TaxTMI 
TaxTMI 
Master Circular on (i) Scheme of Arrangement by Listed Entities and (ii) Relaxation under Sub-rule (7) of rule 19 of the Securities Contracts (Regulation) Rules, 1957
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....led in this Master Circular is given in Appendix at the end of this Master Circular. 5. In case of any inconsistency between the Master Circular and the applicable circulars, the content of the relevant circular shall prevail. 6. This circular is available on SEBI website at www.sebi.gov.in. Yours faithfully Yogita Jadhav General Manager Table of Contents Particulars Page No. Preliminary 3 Part I Requirements before the Scheme of arrangement is submitted for sanction by the National Company Law Tribunal (NCLT) A. Requirements to be fulfilled by Listed entity B. Obligations of Stock Exchange(s) C. Processing of the Draft Scheme by SEBI 4-11 12 12 Part II 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 B. Application by a listed entity for Listing of warrants offered along with Non-Convertible Debentures (NCDs) C. Requirements to be fulfilled by Stock Exchange(s) D. Processing of the Scheme by SEBI 13-16 17 17 17 Format for Auditor's Certificate 18-19 Format for Report on Complaints 20 Format of the C....
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.... group of shareholders or shareholders of unlisted companies pursuant to such schemes shall follow the pricing provisions of Chapter V of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018, as amended from time to time (hereinafter referred to as "the ICDR Regulations"). It is clarified that the 'relevant date' for the purpose of computing pricing shall be the date of Board meeting in which the scheme is approved.3 6. The listed entity shall pay a fee to SEBI at the rate of 0.1% of the paid-up share capital of the listed/ transferee / resulting company, whichever is higher, post sanction of the proposed scheme, subject to a cap of ₹ 5,00,000. PART - I4 Requirements before the Scheme of arrangement is submitted for sanction by the National Company Law Tribunal (NCLT) A. Requirements to be fulfilled by Listed Entity 1. Designated Stock Exchange (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) Ru....
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...., taking into consideration, interalia, that the scheme is not detrimental to the shareholders of the listed entity. (j) Declaration from the listed entity on any past defaults of listed debt obligations of the entities forming part of the scheme.7 (k) No Objection Certificate (NOC) from the lending scheduled commercial banks/financial institutions/debenture trustees.8 2A. The valuation report referred to in Para 2(b) above and the Fairness opinion referred to in Para 2(d) above shall be provided by a Registered Valuer and Independent SEBI Registered Merchant Banker respectively. The Registered Valuer and the merchant banker referred herein shall not be treated as independent in case of existence of any material conflict of interest among themselves or with the company, including that of common directorships or partnerships. 3. Conditions for schemes of arrangement involving unlisted entities In case of schemes of arrangement between listed and unlisted entities, the following conditions shall be satisfied: (a) The listed entity shall include the applicable information pertaining to the unlisted entity/ies involved in the scheme in the format specified for abridged pros....
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....ned-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 limited purpose of this Circular, 'resultant company' shall mean a company arising / remaining after the listed entity undertakes a Scheme of Arrangement. 5. Auditor's certificate (a) An auditors' certificate shall be filed to the effect that the accounting treatment contained in the scheme is in compliance with all the Accounting Standards specified by the Central Government under Section 133 of the Companies Act, 2013 read with the rules framed thereunder or the Accounting Standards issued by ICAI, as applicable, and other generally accepted accounting principles. Provided that in case of companies where the respective sectoral regulatory authorities have prescribed norms for accounting treatment of items in the financial statements contained in the scheme, the requirements of the regulatory authorities shall prevail. Explanation - For this purpose, mere disclosure of deviations ....
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....sal accompanying resolution 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 Registered Valuer12 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. 10. 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 fact....
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....h an undertaking certified by the auditor and duly approved by the Board of the company, clearly stating the reasons for non-applicability of para (10) (a) above. (d) The undertaking as referred to in Para (10) (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. 11. 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. 12. Additional conditions to be complied before the Scheme of arrangement is submitted for sanction by the National Company Law Tribunal (NCLT) if listing of Non-Convertible Redeemable Preference Shares (NCRPS) / Non-Convertible Debentures (NCDs) is envisaged through a Scheme of Arrangement14 A. A listed entity, which has listed its specified securities, may seek listing of NCRPS/NCDs issued pursuant to....
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....- (a) Face Value & Price (b) Dividend/Coupon: The terms of payment of dividends/Coupon including frequency etc (c) Credit Rating (d) Tenure/ Maturity (e) Redemption: The terms of redemption, amount, date, redemption premium/discount,, and early redemption scenarios, if any (f) Other embedded features (put option, call option, dates, notification times, etc. (g) Other terms of instruments (i.e. term sheet) (h) Any other information/details pertinent for the investors (vi) Other Conditions which would be required to be followed are as under: The listed entity shall further ensure compliance with the following: (a) The captioned issue of NCRPS/NCDs shall be in compliance with all the applicable provisions of the Companies Act, 2013 including the provisions related to creation and maintenance of Capital Redemption Reserve/Debenture Redemption Reserve. (b) All such NCRPS/NCDs shall be issued in dematerialized form only. (c) In case of NCDs, the issuer has appointed/ shall appoint Debenture Trustee in compliance with SEBI (Issue and Listing of Debt Securities) Regulations, 2008 and Companies Act, 2013. (d) In case of NCDs, the issuer has created/ shall create ....
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....k exchanges within 30 days from the later of the following: (a) date of receipt of satisfactory reply on clarifications, if any sought from the listed entity by SEBI; or (b) date of receipt of opinion from Independent Chartered Accountant, if sought by SEBI; or (c) date of receipt of 'No-Objection' letter from the Stock Exchanges. (d) date of receipt of copy of in-principle approval for listing of equity shares of the company seeking exemption from Rule 19(2)(b) of Securities Contracts (Regulation) Rules, 1957 on designated Stock Exchange, in case the listed entity is listed solely on regional Stock Exchange. 3. All complaints/comments received by SEBI on the Draft Scheme of arrangement shall be forwarded to the designated Stock Exchange, for necessary action and resolution by the listed entity. D. Fractional entitlements, if any.18 1. The fractional entitlements, if any, shall be aggregated and held by the trust, nominated by the Board in that behalf, who shall sell such shares in the market at such price, within a period of 90 days from the date of allotment of shares, as per the draft scheme submitted to SEBI. The listed company shall submit to the designated sto....
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....reholding to at least 25% within a period of one year from the date of listing of its securities and an undertaking to this effect is incorporated in the scheme.20 (c) The transferee entity will not issue/ reissue any shares, not covered under the Draft Scheme of arrangement; (d) As on date of application, there are no outstanding warrants/ instruments/ agreements which give right to any person to take the equity shares in the transferee entity at any future date. If there are such instruments stipulated in the Draft Scheme, the percentage referred to in Para (b) above shall be computed after giving effect to the consequent increase of capital on account of compulsory conversions outstanding as well as on the assumption that the options outstanding, if any, to subscribe for additional capital will be exercised; and (e) The shares of the transferee entity issued in lieu of the locked-in shares of the transferor entity will be subject to lock-in for the remaining period. 2. Additional conditions for entities seeking relaxation under sub-rule (7) of rule 19 of the Securities Contracts (Regulation) Rules, 1957 Stock Exchanges shall ensure that, an unlisted issuer may make an ....
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....applicable if the post scheme shareholding pattern of the unlisted entity is exactly similar to the shareholding pattern of the listed entity. Provided further that the shares locked-in under this clause may be pledged with any scheduled commercial bank or public financial institution as collateral security for loan granted by such bank or institution if pledge of shares is one of the terms of sanction of the loan; Provided further that the shares locked-in under this clause may be transferred 'inter-se' among promoters in accordance with the conditions specified under Regulation 22 of ICDR Regulations. Provided further that shares presently under lock-in as per the provisions of earlier circulars shall also be governed by the provisions of this clause22. 5. It shall be ensured that steps for listing of specified securities are completed and trading in securities commences within sixty23 days of receipt of the order of the Hon'ble High Court/NCLT, simultaneously on all the stock exchanges where the equity shares of the listed entity (or transfer entity) are/were listed. Before commencement of trading, the transferee entity in addition to disclosing the information in the fo....
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....feror entity during the preceding three years; v. Any material development after the date of the balance sheet; and w. Such other information as may be specified by the Board from time to time.24 B. 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 if it satisfies the following conditions: (a) warrants are issued as combined offering of NCDs and warrants through qualified institutions placement under Chapter VIII of the ICDR Regulations; (b) the issuer is in compliance with all the provisions of Chapter VIII of the ICDR Regulations; and (c) NCDs and warrants shall be traded in the minimum trade lot of one lakh rupees. C. Requirements to be fulfilled by Stock Exchange(s) 1. The designated Stock Exchange shall forward the documents to the Board along with its recommendations on documents and recommendation, if applicable, on the application for ....
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....cate, 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 in compliance with SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and circulars issued thereunder and all the applicable Accounting Standards notified by the Central Government under the Companies Act, 1956/ Companies Act, 2013 and/or the accounting treatment in respect of ………………………. (specify the financial statement item(s)) as prescribed by ………………………………. (name of the regulator) vide its Notification ……&h....
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....mpliance 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 ANNEXURE IV Format for report on unpaid dues Sr. No. Particulars Details of dues/fine Amount Reason for non payment 1. Pending Dues of SEBI 2. Pending Dues of Stock Exchanges 3. Pending Dues of Depositories Annexure V Computation of Fair Share Exchange Ratio XYZ Ltd PQR Ltd Valuation Approach Value per Share Weight Value per Share Weight Asset Approach x a y d Income Approach x b y e Market Approach x c y f Relative V....