The Securities and Exchange Board of India (SEBI) on March 28, 2023, issued a circular regarding the norms for Scheme of Arrangement by unlisted Stock Exchanges, Clearing Corporations, and Depositories.
In case of unlisted MIIs desirous of undertaking scheme of arrangement or involved in a scheme of arrangement, there is no specific provision under extant law to file the draft scheme of arrangement with SEBI prior to filing the application before any Court or Tribunal.
With a view to harmonize and bring uniformity in the norms related to scheme of arrangement for unlisted MIIs in line with provisions currently applicable to listed MIIs, comments of unlisted MIIs were sought and the matter was deliberated in Secondary Market Advisory Committee (SMAC).
The detailed framework for scheme of arrangement by unlisted MIIs are as stated:
• The unlisted MII desirous of undertaking a scheme of arrangement or involved in a scheme of arrangement as per the provisions of Companies Act 2013 shall file the draft scheme of arrangement along with a non-refundable fee with SEBI for obtaining the observation letter or no-objection letter, before filing such scheme with any Court or Tribunal, in terms of requirements specified by SEBI from time to time.
• The unlisted MII shall pay a fee to SEBI at the rate of 0.1% of the paid-up share capital of the unlisted or transferee or resulting company, whichever is higher, post sanction of the proposed scheme, subject to a cap of INR 5,00,000.
• The provisions may 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 SEBI for the purpose of disclosures and the same shall be disseminated on the websites of the unlisted MII.
• Information to be provided to SEBI - The unlisted MIIs shall provide the following information to SEBI while filing the draft scheme of arrangement for obtaining the observation letter or no-objection letter.
• Processing of the Draft Scheme by SEBI - Upon receipt of the application from the unlisted MII, SEBI shall provide its observation letter or no-objection letter on the draft Scheme to the MII. While processing the draft Scheme, SEBI may seek clarifications from any person relevant in this regard including the unlisted MII and if required, may also seek an opinion from an Independent Chartered Accountant.
• Validity of observation letter or no-objection letter - The validity of the observation letter or no-objection letter of SEBI shall be for six months from the date of issuance, within which the Scheme shall be filed with any Court or Tribunal, as required, for approval.
The provisions of this circular shall come into effect from 30th day from the date of issuance of the circular.
[Circular No. SEBI/HO/MRD/MRD-PoD-3/P/CIR/2023/45]
