SCHEME OF ARRANGEMENT UNDER THE COMPANIES
ACT, 1956 –REVISED REQUIREMENTS FOR THE STOCK EXCHANGES AND LISTED COMPANIES – CLARIFICATION
Circular No.:- CIR/CFD/DIL/8/2013
Dated: 21/05/2013
1. This is with reference to SEBI Circular No. CIR/CFD/DIL/5/2013
dated February 4, 2013 on the captioned subject.
2. Subsequent to the issuance of the aforesaid Circular, SEBI has
received queries/representations from market participants expressing
operational difficulties in implementing certain provisions of the said Circular.
Accordingly, upon examination of the representations and concerns
raised therein, it has been decided to provide clarifications and modify
certain provisions of the said Circular as detailed below:
3. Applicability:
3.1. SEBI Circular No. CIR/CFD/DIL/5/2013 dated February 4, 2013
is applicable to all listed companies undertaking a Scheme of Arrangement under
Part IV and Chapter V
of Part VI of the Companies Act, 1956, (Amalgamation/ Merger/ Reconstruction/
Reduction Of Capital, etc.)
3.2. Thus, it is hereby clarified that the Circular referred to in
paragraph 3.1 above and this Circular are applicable even to cases where no exemption from Rule 19(2)(b) of Securities
Contracts (Regulation) Rules, 1957 is sought from SEBI.
4. Requirement of submission of Valuation Report from Independent Chartered Accountant:
4.1. All listed companies undertaking a Scheme of Arrangement
under Part IV and Chapter V of Part VI of the Companies Act, 1956,
(Amalgamation/ Merger/ Reconstruction/ Reduction Of Capital, etc.) are required
to submit a valuation report in terms of Para (I) (A) read with Part A,
Annexure I of the SEBI Circular No. CIR/CFD/DIL/5/2013 dated February 4, 2013.
4.2. However, ‘Valuation Report from an Independent Chartered
Accountant’ need not be required in cases where there is no change in the
shareholding pattern of the listed company / resultant company.
4.3. For the limited purpose of this Circular, ‘change in the
shareholding pattern’ shall mean;
(a) Change in the proportion of shareholding of any of the
existing shareholders of the listed company in the resultant company; or
(b) New shareholder being allotted equity shares of the
resultant company; or
(c) Existing shareholder exiting the company pursuant to the
Scheme of Arrangement
4.4. Further, a few examples meaning ‘no change in shareholding
pattern’ are illustrated below:
i. In case a listed entity (say, “entity A”) demerges a unit and
makes it a separate company (say, “entity B”);
a. if the shareholding of entity B is comprised only of the shareholders
of entity A; and
b. if the shareholding pattern of entity B is the same as in
entity A; and
c. every shareholder in entity B holds equity shares in the
same proportion as held in entity A before the demerger.
It will be treated as
‘no change in shareholding pattern’.
ii. In case a wholly-owned-subsidiary (say, “entity X”) of a
listed entity is merged with the parent listed company (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’.
4.5. In all other cases, ‘Valuation Report from an Independent
Chartered Accountant’ shall be required.
4.6. For the limited purpose of this Circular, ‘resultant company’
shall mean a company arising / remaining after the listed company undertakes a
Scheme of Arrangement.
5. Para 5.3 of Circular dated February 4,
2013 is modified as follows:
5.3 If a company is listed on any stock exchange having nationwide
terminals and/or regional stock exchange, it shall choose the stock exchange
having nation-wide trading terminals as the designated stock exchange for the
purpose of coordinating with SEBI.
5.3.(a) For companies listed solely on regional stock exchange,
wherein exemption from Rule 19(2)(b) of Securities Contracts (Regulation)
Rules, 1957 is sought, the company shall obtain in-principle approval for
listing of equity shares on any stock exchange having nationwide trading
terminals.
5.3.(b) For companies listed solely on regional stock exchange,
wherein exemption from Rule 19(2)(b) of Securities Contracts (Regulation)
Rules, 1957 is not sought by the company, the following shall apply:
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 the SEBI Circular No. CIR/CFD/DIL/5/2013 dated
February 4, 2013. For such purpose, stock exchanges having nationwide trading
terminals may charge reasonable fees from such companies.
6. Following clause shall be inserted in Para 5.10 of the Circular
dated February 4, 2013 in view of 5.3 (a) above:
5.10 (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 company is listed solely on regional stock exchange.
7. Para 5.16 of the Circular dated February 4, 2013 shall stand
replaced as under:
5.16 (a) Listed companies shall ensure that the Scheme
submitted with the Hon’ble High Court for sanction, provides for voting by
public shareholders through postal ballot and e-voting, after disclosure of all
material facts in the explanatory statement sent to the shareholders in
relation to such resolution, in the following cases:
i. Where additional shares have been allotted to Promoter /
Promoter Group, Related Parties of Promoter / Promoter Group, Associates of
Promoter / Promoter Group, Subsidiary/(s) of Promoter / Promoter Group of the
listed company, or
ii. Where the Scheme of Arrangement involves the listed company
and any other entity involving Promoter / Promoter Group, Related Parties of
Promoter / Promoter Group, Associates of Promoter / Promoter Group,
Subsidiary/(s) of Promoter / Promoter Group.
iii. Where the parent listed company, has acquired the equity
shares of the subsidiary, by paying consideration in
cash or in kind in
the past to any of the shareholders of the subsidiary who may be Promoter /
Promoter Group, Related Parties of Promoter / Promoter Group, Associates of
Promoter / Promoter Group, Subsidiary/(s) of Promoter / Promoter Group of the
parent listed company, and if that subsidiary is being merged with the parent
listed company under the Scheme.
Such Schemes shall also provide that the Scheme shall be acted
upon only if the votes cast by the public shareholders in favor of the proposal
are more than the number of votes cast by the public
shareholders against it. The term ‘public’ shall carry the same meaning as
defined under Rule 2 of Securities Contracts (Regulation) Rules, 1957.
5.16 (b) For all other cases, the requirements stated at 5.16 (a)
shall not be applicable. In such cases, the listed entities shall furnish an
undertaking certified by the auditor and duly approved by the Board of the
company, clearly stating the reasons for non-applicability of Para 5.16 (a).
5.16 (c) The undertaking as referred to in Para 5.16 (b) above
shall be displayed on the websites of stock exchanges and the listed company
along with other documents submitted, as stipulated under Para 2, Part A,
Annexure I, of the SEBI Circular No. CIR/CFD/DIL/5/2013 dated February 4, 2013.
5.16 (d) Any mis-statement 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.
5.16 (e) For the purpose of this Circular, ‘Related Party’ shall
carry the same meaning as defined under AS 18 or IND AS 24.
8. Applicability of this Circular: The Circular is applicable to
listed companies undertaking Scheme of Arrangement which are governed by the
SEBI Circular No. CIR/CFD/DIL/5/2013 dated February 4, 2013.
Regards
CA. Mona Singhal
Partner
Arpit Gupta & Associates
Chartered Accountants
701, Nirmal Tower,
26, Barakhamba Road,
Connaught Place, Delhi-110001
Mobile:- +91-9873082769
Website: www.caaga.co.in
