Securities and Exchange Board of India, on 22nd December, 2020 has issued a Master Circular on:
(i) Scheme of Arrangement by Listed Entities and
(ii) Relaxation under *Subrule (7) of rule 19 of the Securities Contracts (Regulation) Rules, 1957
Background:
In order to enable the users to have access to the applicable circulars at one place, Master Circular in respect of schemes of arrangement has been prepared. This Master Circular is a compilation of relevant and updated circulars issued by SEBI which deal with schemes of arrangement and which are operational as on date of this circular.
Please note that in case of any inconsistency between the Master Circular and the applicable circulars, the content of the relevant circular will prevail.
Key Takeaways:
A. Part I of the Master Circular deals with the requirements before the Scheme of arrangement is submitted for sanction by the National Company Law Tribunal (NCLT) and is divided into the following three parts:
a. Requirements to be fulfilled by Listed entity
b. Obligations of Stock Exchange(s)
c. Processing of the Draft Scheme by SEBI
B. Part II of the Circular deals with Application for relaxation under Sub-rule (7) of rule 19 of the Securities Contracts (Regulation) Rules, 1957:
1. Requirements to be fulfilled by Listed Entity for Listing of Equity Shares:
a. 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-rule (2) of rule 19 thereof, for listing of its equity shares on a recognized Stock Exchange without making an initial public offer, if it satisfies specific conditions detailed in the Master Circular.
b. 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 application to the Board under sub-rule (7) of rule 19 of the SCRR, pursuant to Part II(A) of this Circular if it satisfies the following conditions:
i. Observation Letter or No Objection Letter has been issued by the Stock Exchanges to the Draft Scheme of arrangement;
ii. The listing of the equity shares of the transferee entity is in terms of the Scheme sanctioned by the Hon’ble High Court / NCLT or its order whereby the Scheme of arrangement has been sanctioned;
iii. The equity shares sought to be listed have been allotted by the unlisted issuer (transferee entity) to the holders of securities of a listed entity (transferor entity);
iv. The names of the allottees 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.
c. Additional conditions to be complied after the Scheme is sanctioned by the Hon’ble High Court / NCLT and at the time of making application for relaxation under Sub-rule (7) of rule 19 of the Securities Contracts (Regulation) Rules, 1957 if listing of Non-Convertible Redeemable Preference Shares (NCRPS) / Non-Convertible Debentures (NCDs) is envisaged through a Scheme of Arrangement.
The application for relaxation under Sub-rule (7) of rule 19 of SCRR for listing of NCRPS/ NCDs shall include a detailed Compliance Report as per the format specified in Annexure VI, duly certified by the Company Secretary and the Managing Director, confirming compliance of the Scheme of Arrangement with the provisions of SEBI Circular No. CIR/IMD/DF/50/2017 dated May 26, 2017 and SEBI Circular No. CFD/DIL3/CIR/2017/21 dated March 10, 2017, as amended from time to time and with various regulatory requirements specified for schemes of arrangement.
d. In case of a scheme involving merger of a listed company or its division into an unlisted entity, the entire pre scheme share capital of the unlisted issuer seeking listing shall be locked in as specified in the Master Circular
2. 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:
i. warrants are issued as combined offering of NCDs and warrants through qualified institutions placement under Chapter VIII of the ICDR Regulations;
ii. the issuer is in compliance with all the provisions of Chapter VIII of the ICDR Regulations; and i
iii. NCDs and warrants shall be traded in the minimum trade lot of one lakh rupees.
For a detailed read of the Master Circular, please refer to the hyperlink provided below:
____________________________
*Subrule (7) of rule 19 of the Securities Contracts (Regulation) Rules, 1957:
Rule 19- Requirements with respect to the listing of securities on a recognised stock exchange.
(7)The Securities and Exchange Board of India 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
Source: Securities and Exchange Board of India
