SEBI has amended SEBI Circular No. CFD/DIL3/CIR/2017/21 dated March 10, 2017 which had laid down the framework for Schemes of Arrangement by Listed Entities and relaxation under Rule 19 (7) of the Securities Contracts (Regulation) Rules, 1957 vide Circular No.: CFD/DIL3/CIR/2018/2 dated January 03, 2018
Following are the amendments made by SEBI on January 03, 2018:
| Sl. No. | Clause | Old Provision | New Provision | Remarks |
| 1 | Para 7 | The Provisions of this circular shall not apply to schemes which solely provides for merger of a wholly owned subsidiary 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. An amendment to listing regulations in this regard has already been notified on February 15, 2017. | The Provisions of this circular shall not apply to schemes which solely provides 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.” | The amendment is to give exemption for the Demergers/slump sale of the Wholly owned subsidiary with the parent Company from taking NOC from Stock Exchanges. |
| 2 | Para (I) (A) (2) | New para | 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 Independent Chartered Accountant and Independent SEBI Registered Merchant Banker respectively. The chartered accountant 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. | Independent word defined. |
| 3 | Para(I)(A)(3)(b) | 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 shall not be less than 25%. | 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%. | |
| 4 | Para II | Requirements after the Scheme is Sanctioned by the Hon’ble High Court / NCLT (hereinafter referred to as “Approved Scheme”)
1. Submission of Documents Upon sanction of the Scheme by the Hon’ble High Court / NCLT, the listed entity shall submit the documents mentioned below to the Stock Exchanges:- (a) Copy of the High Court/ NCLT approved Scheme; (b) Result of voting by shareholders for approving the Scheme; (c) Statement explaining changes, if any, and reasons for such changes carried out in the Approved Scheme of arrangement vis-à-vis the Draft Scheme of arrangement (d) Status of compliance with the Observation Letter or No Objection Letter of the Stock Exchange(s) (e) The application seeking exemption from Rule 19(2)(b) of SCRR, 1957, wherever applicable; and (f) Report on Complaints as per Annexure III of this Circular. |
Omitted | Eliminates unnecessary and duplication of compliances by waiving of the requirement from filing of certain documents to Stock exchanges after the scheme is sanctioned by NCLT. |
| 5 | Para(III)(A)(3) | In case of a scheme involving hiving-off of a division from a listed entity 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 issuer. (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. |
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 issuer. (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. Provided 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 40 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 clause |
Merger/Demerger/Slump all three shall be bound by the provision of lock in of promoter’s shares if a listed entity is getting merged/demerged into a listed company.
Further, locked in shares can be pledged with any scheduled commercial bank or public financial institution for loan and can be transferred inter-se within the promoter group. |
| 6 | Para (III) (A) (4) | The listed entity and/or transferee entity (unlisted entity), as applicable, shall ensure that it has completed steps for listing of its specified securities, within thirty days of the receipt of the order of the Hon’ble High Court/ NCLT sanctioning the Scheme, simultaneously on all the Stock Exchanges where the equity shares of the listed entity (or transferor entity) are/were listed. | Omitted | |
| 7 | Para (III) (A) (5) | It shall be ensured that trading in securities commences within forty five days of the order of the Hon’ble High Court/ NCLT. Before commencement of trading, the transferee entity shall 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: | 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 transferor entity) are/were listed. Before commencement of trading, the transferee entity shall 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 | Clause 4 & 5 are merged into one clause to removes ambiguity.
60 days time from the date of receipt of order is provided for getting required securities to be listed and traded. |
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