Compliance for Listed Entity before submission of Scheme of arrangement for NCLT sanction

CS Rupal Patel 16 Feb 2021 10,161 Views 0 comment Print SEBI | Articles

Introduction:

Amalgamations, Mergers, arrangement, reconstructions, capital reductions and acquisitions are used as instruments of momentous growth and are increasingly getting accepted by Indian businesses as critical tool of business strategy. They are widely used in a wide array of fields such as information technology, telecommunications, and business process outsourcing as well as in traditional business to gain strength, expand the customer base, cut competition or enter into a new market or product segment. Mergers and acquisitions may be undertaken to access the market through an established brand, to get a market share, to eliminate competition, to reduce tax liabilities or to acquire competence or to set off accumulated losses of one entity against the profits of other entity. Company Secretary Professionals play key role in Corporate Actions pertaining to Scheme of Arrangement of listed entities.

Section 230-232 of the Companies Act, 2013 read with the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (hereinafter referred to as “listing regulations”) place obligations with respect to Scheme of Arrangement on Listed Entities and Stock Exchange(s) in Regulation 11, 37 and 94.

Regulation 11 of the listing regulations, inter-alia, provides that any scheme of arrangement / amalgamation / merger / reconstruction / reduction of capital etc. to be presented to any Court or Tribunal does not in any way violate, override or limit the provisions of securities laws or requirements of the Stock Exchanges. Regulation 37 of listing regulations provides that the listed entities desirous of undertaking scheme of arrangement or involved in a scheme of arrangement shall file the draft scheme with Stock Exchange(s) for obtaining Observation Letter or No-objection Letter, before filing such scheme with any court or Tribunal. Regulation 94 of the listing regulations requires Stock Exchanges to forward such draft schemes to SEBI in the manner prescribed by SEBI.

Sub-rule (7) of rule 19 of the Securities Contracts (Regulation) Rules, 1957 (hereinafter referred to as “the SCRR”) provides that Securities and Exchange Board of India (SEBI) may, at its own discretion or on the recommendation of a recognized Stock Exchange, waive or relax the strict enforcement of any or all of the requirements with respect to listing prescribed by these rules.

The issuance of shares under schemes in case of allotment of shares only to a select 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. The Provisions of SEBI circular No. SEBI/HO/CFD/DIL1/CIR/P/2020/249 dated December 22, 2020 shall not apply to schemes which solely provide for merger of a wholly owned subsidiary or its division with the parent company. However, such draft schemes shall be filed with the Stock Exchanges for the purpose of disclosures and the Stock Exchanges shall disseminate the scheme documents on their websites.

This article contains Listing Regulations’ requirements to be fulfilled by Listed Entity before submission of the Scheme of arrangement for sanction by the National Company Law Tribunal (NCLT) and for the purpose of convenience, it has been divided into to two parts, i.e. Part-I for listed entities and Part – II for listed and unlisted entities.

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

1. Designated Stock Exchange

(a) Listed entities are required to choose one of the Stock Exchanges having nationwide trading terminals as the designated Stock Exchange for the purpose of coordinating with

(b) For companies listed solely on regional Stock Exchange, wherein exemption from Rule 19(2) (b) of Securities Contracts (Regulation) Rules, 1957 is sought, the listed entity is required to obtain in-principle approval for listing of equity shares on any Stock Exchange having nationwide trading terminals. In cases, wherein exemption from Rule 19(2)(b) of Securities Contracts (Regulation) Rules, 1957 is not sought by the listed entity, one of the Stock Exchanges having nationwide trading terminals shall provide a platform for dissemination of information of such Schemes and other documents required mentioned in this Article. For such purpose, Stock Exchanges having nationwide trading terminals may charge reasonable fees from such

2. Submission of Documents

The Listed entity shall submit the following documents to the Stock Exchanges:-

(a) Draft Scheme of arrangement/ amalgamation/ merger/ reconstruction/ reduction of capital, ;

(b) Valuation Report as mentioned below:

(i) All listed entities are required to submit a valuation report from a Registered Valuer.

For the purpose of this clause, the independent Registered Valuer shall be a person, registered as a valuer, having such qualifications and experience and being a member of an organization recognized, as specified in Section 247 of the Companies Act, 2013 read with the applicable Rules issued thereunder.

(ii) However, Valuation Report is not required in cases where there is no change in the shareholding pattern of the listed entity / resultant company.

(iii) Here, “change in the shareholding pattern” shall mean;

(1) change in the proportion of shareholding of any of the existing shareholders of the listed entity in the resultant company; or

(2) new shareholder being allotted equity shares of the resultant company; or

(3) existing shareholder exiting the company pursuant to the Scheme of Arrangement

A few examples illustrating “no change in shareholding pattern” are indicated below:

(i) In case a listed entity (say, “entity A”) demerges a unit and makes it a separate company (say, “entity B”);

1) if the shareholding of entity B is comprised only of the shareholders of entity A; and

2) if the shareholding pattern of entity B is the same as in entity A; and

3) every shareholder in entity B holds equity shares in the same proportion as held in entity A before the demerger

(ii) In case a wholly-owned-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”.

Here, ‘resultant company’ shall mean a company arising / remaining after the listed entity undertakes a Scheme of Arrangement.

(c) Report from the Audit Committee recommending the Draft Scheme, taking into consideration, interalia, the Valuation Report. The Valuation Report is required to be placed before the Audit Committee of the listed entity. The Audit Committee report shall also comment on the following:

- Need for the merger/demerger/amalgamation/arrangement
- Rationale of the scheme
- Synergies of business of the entities involved in the scheme
- Impact of the scheme on the
- Cost benefit analysis of the ;

(d) Fairness opinion by a SEBI Registered merchant banker on valuation of assets/shares done by the valuer for the listed entity and unlisted entity;

(e) Pre and post amalgamation shareholding pattern of unlisted entity;

(f) Audited financials of last 3 years (financials not being more than 6 months old) of unlisted entity;

(g) Auditor’s Certificate in prescribed format;

(h) Detailed Compliance Report in prescribed format duly certified by the Company Secretary, Chief Financial Officer and the Managing Director, confirming compliance with various regulatory requirements specified for schemes of arrangement and all accounting standards, which is also required to be uploaded on the website of Listed Entity.

(i) Report from the Committee of Independent Directors recommending the draft Scheme, taking into consideration, interalia, that the scheme is not detrimental to the shareholders of the listed

(j) Redressal of Complaints

(1) The Listed entity is required to submit to Stock Exchanges a ‘Report on Complaints’ which shall contain the details of complaints/comments received by it on the Draft Scheme from various sources (complaints/comments written directly to the listed entity or forwarded to it by the Stock Exchanges/SEBI) in prescribed format prior to obtaining Observation Letter from Stock Exchanges on Draft Scheme.

Here, ‘Report on Complaints’ is required to be submitted by listed entity to the Stock Exchanges within 7 days of expiry of 21 days from the date of filing of Draft Scheme with Stock Exchanges and hosting the Draft Scheme along with documents as specified above, on the websites of Stock Exchanges and the listed entity. It is also required to be uploaded on the website of Listed Entity.

(k) Unpaid Dues Report

(1) All listed entities are required to ensure that all dues to, and/or fines/penalties imposed by SEBI, Stock Exchanges and the Depositories have been paid/settled before filing the draft scheme with the designated stock exchange.

(2) In case of unpaid dues / fines / penalties, the listed entity is required to submit to stock exchanges a ‘Report on the Unpaid Dues’ which shall contain the details of such unpaid dues in the prescribed format, prior to obtaining Observation Letter from stock exchanges on the draft scheme.

(3) The report on unpaid dues as mentioned above, is required to be submitted by listed entity to the stock exchanges along with the draft scheme.

(4) Any misstatement or furnishing of false information with regard to the said information shall make the listed entity liable for punitive action as per the provisions of applicable laws and regulations.

3. Conditions for schemes of arrangement involving unlisted entities

In case of schemes of arrangement between listed and unlisted entities, the following conditions are required to 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 prospectus as provided in Part E of Schedule VI of the ICDR Regulations, in the explanatory statement or notice or proposal accompanying resolution to be passed sent to the shareholders while seeking approval of the

The accuracy and adequacy of such disclosures shall be certified by a SEBI Registered Merchant Banker after following the due diligence process. Such disclosures shall also be submitted to the Stock Exchanges for uploading on their websites.

(c) The percentage of shareholding of pre-scheme public shareholders of the listed entity and the Qualified Institutional Buyers (QIBs) of the unlisted entity, in the post scheme shareholding pattern of the “merged” company on a fully diluted basis shall not be less than 25%.

(d) Unlisted entities can be merged with a listed entity only if the listed entity is listed on a Stock Exchange having nationwide trading

4.Disclosure on the Website

(a) Immediately upon filing of the Draft Scheme of arrangement with the Stock Exchanges, the listed entity shall disclose the Draft Scheme of arrangement and all the documents specified above on it website.

(b) Listed entity shall also disclose the Observation Letter of the Stock Exchanges on its website within 24 hours of receiving the same.

5. Explanatory Statement or notice or proposal accompanying resolution sent to shareholders for seeking approval of scheme

(a) The Listed entity is required to 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 is required to 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 Valuer for the listed entity and unlisted entity.

6. Approval of Shareholders to Scheme through e- Voting:

(a) The Listed entities are required to 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 facts in the explanatory statement sent to the shareholders in relation to such

(b) The Scheme of arrangement shall be acted upon only if the votes cast by the public shareholders in favour of the proposal are more than the number of votes cast by the public shareholders against it, 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 entity, or

ii. Where the Scheme of Arrangement involves the listed entity 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 entity has acquired, either directly or indirectly, the equity shares of the subsidiary from 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 entity, and if that subsidiary is being merged with the parent listed entity under the

iv. Where the scheme involving merger of an unlisted entity results in reduction in the voting share of pre-scheme public shareholders of listed entity in the transferee / resulting company by more than 5% of the total capital of the merged entity;

v. where the scheme involves transfer of whole or substantially the whole of the undertaking of the listed entity and the consideration for such transfer is not in the form of listed equity shares;

Here, the expression “substantially the whole of the undertaking” in any financial year shall mean 20% or more of value of the company in terms of consolidated net worth or consolidated total income during previous financial year as specified in Section 180(1)(a)(ii) of the Companies Act, 2013.

And, the term ‘public’ shall carry the same meaning as defined under Rule 2 of Securities Contracts (Regulation) Rules, 1957.

For all other cases, the requirements stated above, i.e. approval only by public shareholders, 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 (6) (a) above.

Such undertaking shall be displayed on the websites of Stock Exchanges and the listed entity along with other documents submitted to the Stock Exchanges.

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.

7. 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 Arrangement

A. A listed entity, which has listed its specified securities, may seek listing of NCRPS/NCDs issued pursuant to a scheme of arrangement, if it has complied with the following provisions:-

(i) Eligibility for seeking listing of NCRPS/ NCDs

A listed entity which has listed its specified securities may seek listing of NCRPS/NCDs issued pursuant to a scheme of arrangement only in case where the listed entity is a part of such scheme of arrangement and such NCRPS/NCDs are issued to the holders of specified securities of such listed entity. Such scenarios may broadly include the following:

(a) A listed entity, which has listed its specified securities, (demerged entity) demerges a unit and transfers the same to another entity (resultant entity), and the resultant entity issues NCRPS/NCDs to the holders of the specified securities of listed entity (i.e. demerged entity) as a consideration under the scheme of

(b) A listed entity, which has listed its specified securities, (amalgamating entity) is merged with another entity (amalgamated entity), and the amalgamated entity issues NCRPS/NCDs to the holders of the specified securities of listed entity (i.e. amalgamating entity) as a consideration under the scheme of

It must be kept in mind that only the NCRPS/NCDs issued to the holders of listed specified securities, vide the scheme of arrangement, would be eligible for seeking listing. However, if the same series/class of NCRPS/NCDs are also allotted to other investors, other than the allotment done to the holders of listed specified securities as per the scheme of arrangement, then such NCRPS/NCDs would not be eligible for seeking listing.

(ii) Tenure/ Maturity:

The minimum tenure of the NCRPS/NCDs shall be one year.

(iii) Credit Rating:

The NCRPS/NCDs have been assigned minimum such credit rating, if any, specified for public issue of NCRPS under SEBI (Issue and Listing of Non-Convertible Redeemable Preference Shares) Regulations, 2013 or for public issue of NCDs in terms of SEBI (Issue and Listing of Debt Securities) Regulations, 2008, as the case may be by a credit rating agency registered with the Board.

(iv) Valuation Report:

The Valuation Report shall also include valuation of the underlying NCRPS/ NCDs to be issued pursuant to the scheme of arrangement.

(v) Disclosures in the Scheme of Arrangement:

The following should be clearly disclosed in Draft Scheme of Arrangement:-

(a) Face Value & Price

(b) Dividend/Coupon: The terms of payment of dividends/Coupon including frequency etc

(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, )

(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 is required further to 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

(b) All such NCRPS/NCDs shall be issued in dematerialized form

(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,

(d) In case of NCDs, the issuer has created/ shall create an appropriate charge or security, wherever applicable, in compliance with SEBI (Issue and Listing of Debt Securities) Regulations, 2008 and Companies Act,

(e) All the provisions of SEBI (Issue and Listing of Non-Convertible Redeemable Preference Shares) Regulations, 2013 and SEBI (Issue and Listing of Debt Securities) Regulations, 2008 have been/ shall be complied with except the provisions related to making a public issue, or making a private placement, or filing of offer document,

B. Processing of the Draft Scheme by Stock Exchange(s)

1. The designated Stock Exchange, upon receipt of the Draft Scheme of Arrangement and documents as referred above shall forward the same to SEBI within three working

2. The ‘Report on Complaints’ shall be forwarded by the Stock Exchanges to SEBI before SEBI communicates its comments on the Draft Scheme to the Stock Exchanges.

3. The Stock Exchanges where the specified securities are listed / proposed to be listed shall also disclose on their websites the documents as referred above immediately on receipt. It shall also disclose the Observation Letter on its website immediately upon issuance.

4. Stock Exchanges shall provide the ‘No-Objection’ letter to SEBI on the draft scheme; in co-ordination with each other. SEBI shall issue Comment letter upon receipt of ‘‘No- Objection’ letter from Stock Exchanges having nationwide trading terminals. In other cases, SEBI shall issue Comment letter upon receipt of ‘‘No-Objection’ letter from the Designated Stock Exchange.

5. The ‘Unpaid Dues Report’ shall be forwarded by the Stock Exchanges to SEBI before SEBI communicates its comments on the Draft Scheme to the Stock Exchanges.

C. Processing of the Draft Scheme by SEBI

1. Upon receipt of ‘No-Objection’ letter from the Stock Exchanges, SEBI shall provide its comments on the Draft Scheme of arrangement to the Stock Exchanges. While processing the Draft Scheme, SEBI may seek clarifications from any person relevant in this regard including the listed entity or the Stock Exchanges and may also seek an opinion from an Independent Chartered

2. SEBI shall endeavour to provide its comments on the Draft Scheme to the stock 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

(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

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

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

1. 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 the following conditions:

(a) The equity shares sought to be listed are proposed to be allotted by the unlisted issuer (transferee entity) to the holders of securities of a listed entity (transferor entity) pursuant to a scheme of reconstruction or amalgamation (Scheme) sanctioned by NCLT under Section 230-234 of the Companies Act, 2013;

(b) At least twenty five per cent of the post-scheme paid up share capital of the transferee entity shall comprise of shares allotted to the public shareholders in the transferor entity;

If an entity which does not comply with the above requirement may satisfy the following conditions:

i. The entity has a valuation in excess of Rs.1600 crore as per the valuation report;

ii. The value of post-scheme shareholding of public shareholders of the listed entity in the transferee entity is not less than Rs.400 crore;

iii. At least ten percent of the post-scheme paid up share capital of the transferee entity comprises of shares allotted to the public shareholders of the transferor entity; and the entity shall increase the public shareholding 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.

(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 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

2. Additional conditions for entities seeking relaxation under sub-rule (7) of rule 19 of the Securities Contracts (Regulation) Rules, 1957

As mentioned above, 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, if it satisfies the following conditions:

(a) Observation Letter or No Objection Letter has been issued by the Stock Exchanges to the Draft Scheme of arrangement;

(b) 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;

(c) 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);

(d) 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

3. 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 Arrangement¹⁷

The application for relaxation under Sub-rule (7) of rule 19 of SCRR for listing of NCRPS/ NCDs shall include a detailed Compliance Report, in specified format, 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.

4. 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 follows:

a) Shares held by Promoters up to the extent of twenty percent of the post-merger paid-up capital of the unlisted issuer, shall be locked-in for a period of three years from the date of listing of the shares of the unlisted issuer;

b) The remaining shares shall be locked-in for a period of one year from the date of listing of the shares of the unlisted

c) No additional lock-in shall be applicable if the post scheme shareholding pattern of the unlisted entity is exactly similar to the shareholding pattern of the listed entity.

5. It shall be ensured that steps for listing of specified securities are completed and trading in securities commences within sixty 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 form of an information document on the website of the stock exchange/s shall also give an advertisement in one English and one Hindi newspaper with nationwide circulation and one regional newspaper with wide circulation at the place where the registered office of the transferee entity is situated, giving following details:

a. Name of the Company;

b. Address of Registered Office and Corporate Office of Company;

c. Details of change of name and/or object clause;

d. Capital structure – pre and post scheme of amalgamation with details of the authorized, issued, subscribed and paid up capital (Number of instruments, description, and aggregate nominal value);

e. Shareholding pattern giving details of its promoter group shareholding, group companies – pre and post scheme of amalgamation;

f. Names of its ten largest shareholders – number and percentage of shares held by each of them, their interest, if any;

g. Name and details of Promoters – educational qualifications, experience, address;

h. Name and details of Board of Directors (experience including current / past position held in other firms);

i. Business Model / Business Overview and Strategy;

j. Reason for the amalgamation;

k. Restated Audited Financials for the previous three financial years prior to the date of listing;

l. Latest restated audited financials along with notes to accounts and any audit qualifications. (Financial statements should not be later than six months prior to the date of listing);

m. Change in accounting policies in the last three years and their effect on profits and reserves;

n. Summary table of contingent liabilities as disclosed in the restated financial statements;

o. Summary table of related party transactions in last 3 years as disclosed in the restated financial statements;

p. Details of its other group companies including their capital structure and financial statements;

q. Internal Risk Factors (Minimum 5 and Maximum 10);

r. Outstanding litigations and defaults of the transferee entity, promoters, directors or any of the group companies;

s. Regulatory Action, if any – disciplinary action taken by SEBI or Stock Exchanges against the Promoters in last 5 financial years;

t. Brief details of outstanding criminal proceedings against the Promoters;

u. Particulars of high, low and average prices of the shares of the listed transferor 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

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. Requirements to be fulfilled by Stock Exchange(s)

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 granting exemption, under sub-rule (7) of rule 19 of SCRR.

D. Processing of the Scheme by SEBI

1. The Board may, while granting relaxation, if any, under sub-rule (7) of rule 19 of SCRR, stipulate any other conditions as may be deemed necessary in the interest of investors and securities market, under the facts and circumstances of the specific case.

2. SEBI shall endeavour to intimate its comments/approval, wherever applicable, to the designated Stock Exchange within 30 days of receipt of complete information, including the no-objection certificate from the Stock Exchange.

Only upon receipt of Observation Letter or No-objection Letter from Stock Exchange(s), the Scheme of Arrangement can be filed before any court or Tribunal.

Acknowledgement:-

SEBI Circulars:

Circular No. CFD/DIL3/CIR/2017/21 dated March 10, 2017,

Circular No. CFD/DIL3/CIR/2017/26 dated March 23, 2017,

Circular No. CFD/DIL3/CIR/2017/105 dated September 21, 2017,

Circular No. CFD/DIL3/CIR/2018/2 January 03, 2018,

Circular No. SEBI/HO/CFD/DIL1/CIR/P/2019/192 dated September 12, 2019,

Circular No. SEBI/HO/ CFD/ DIL1/CIR/P/2020/215 dated November 3, 2020,

Circular No. SEBI/HO/CFD/DIL1/CIR/P/2020/249 dated December 22, 2020 as available on SEBI website at www.sebi.gov.in.

This Article of Author is published in E-Corporate Manager, presented By Ahmedabad Chapter of WIRC of ICSI in the month of February, 2021.