Scheme of
Arrangement under the Companies Act, 1956 - Revised requirements for the Stock
Exchanges and Listed Companies - Clarification
CIRCULAR,
CIR/CFD/DIL/8/2013, dated May 21, 2013
To
The Stock
Exchanges
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.
9. Stock exchanges are advised to
take into account the requirements of this Circular and to bring the
requirements of this Circular to the notice of the companies listed therein.
10.
This Circular is issued in exercise of the powers conferred under section 11 and
section 11A of the Securities and Exchange Board of India Act, 1992 read with
Rule 19(7) of the Securities Contracts (Regulation) Rules, 1957 and is
available on SEBI website at www.sebi.gov.in under
the categories “Legal Framework” and “Issues and Listing”.
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