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Securities and Exchange Board of India
CIRCULAR
SEBI/HO/MRD/MRD-PoD-3/P/CIR/2023/45 March 28, 2023
To
All recognized Stock Exchanges
All recognized Clearing Corporations
All registered Depositories
Dear Sir/Madam,
Sub: Norms for Scheme of Arrangement by unlisted Stock Exchanges, Clearing
Corporations and Depositories
1. In terms of SEBI (Listing Obligations and Disclosure Requirements) Regulations,
2015, listed entities (including listed Market Infrastructure Institutions (MIIs) such as
Stock Exchanges, Clearing Corporations and Depositories) desirous of undertaking
scheme of arrangement or involved in a scheme of arrangement are required to 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. Stock
Exchanges are required to forward such draft schemes to SEBI for comments.
2. However, 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. Further, the process to be followed by unlisted MIIs in case of
scheme of arrangement are currently not specified.
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Securities and Exchange Board of India
3. 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). Taking into account the recommendations of
SMAC, it has been decided to introduce the framework for Scheme of Arrangement by
unlisted MIIs.
4. The detailed framework for scheme of arrangement by unlisted MIIs is given as under:
4.1. 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.
4.2. 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.
4.3. 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.
4.4. Information to be provided to SEBI:
4.4.1. 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:
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Securities and Exchange Board of India
(a) The Draft Scheme of Arrangement or Amalgamation or Merger or Demerger
or Reconstruction or Reduction of Capital, etc. (hereinafter referred as
“Scheme”)
(b) Approval of the governing board of the unlisted MII for the proposed
Scheme.
(c) Valuation Report provided by an independent registered valuer,
accompanied with an undertaking from the unlisted MII stating that no
material event impacting the valuation has occurred during the last 6
months. The Valuation Report is required to be placed before the Audit
Committee of the unlisted MII.
For the purpose of this clause, the 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.
(d) Report from the Audit Committee recommending the draft Scheme, taking
into consideration, inter-alia, the Valuation Report, and also having
comments on the following:
i. Need for the Scheme
ii. Rationale of the Scheme
iii. Synergies of business of the entities involved in the Scheme
iv. Impact of the Scheme on the shareholders.
v. Cost benefit analysis of the Scheme.
(e) Fairness opinion on valuation of assets or shares done by the valuer for the
unlisted MII shall be taken from an independent SEBI registered Merchant
Banker.
(f) Shareholding pattern of the unlisted MII pre and post the Scheme.
(g) Audited financials of last 3 years (financials not being more than 6 months
old) of unlisted entities.
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Securities and Exchange Board of India
(h) Auditor’s Certificate stating that the accounting treatment contained in the
Scheme is in compliance with all the Accounting Standards specified by the
Central Government under Section 133 of the Companies Act, 2013 read
with the rules framed thereunder or the Accounting Standards issued by
ICAI, as applicable, and other generally accepted accounting principles.
(i) Declaration from the unlisted MII on any past defaults of debt obligations
(including listed debt, if any) of the entities forming part of the Scheme.
(j) No Objection Certificate (NOC) from the lending scheduled commercial
banks or financial institutions or debenture trustees, in case the unlisted MII
or entities forming part of the Scheme have any outstanding debt obligation.
(k) Report on Complaints containing the details of complaints or comments
received by it on the proposed Scheme from various sources (complaints or
comments received directly or forwarded by SEBI or any other agency) as
per Annexure I.
(l) Detailed Compliance Report as per the format specified at Annexure II duly
certified by the Company Secretary, Chief Financial Officer and the
Managing Director, confirming compliance with various regulatory
requirements specified for the Scheme and all accounting standards.
(m) The unlisted MII shall ensure that all dues to, and fines or penalties imposed
by SEBI or any other agency have been paid or settled before filing the draft
Scheme. In case of unpaid dues or fines or penalties, the unlisted entity shall
submit to SEBI a ‘Report on the Unpaid Dues’ which shall contain the details
of such unpaid dues in the format given at Annexure III, prior to filing the
draft Scheme.
(n) The unlisted MII shall provide the information regarding any pending
proceedings or litigations against the unlisted MII or entities forming part of
the Scheme and the liabilities thereof, if any.
(o) Immediately upon filing of the draft Scheme with SEBI, the unlisted MII shall
disclose the draft Scheme along with all relevant documents on its website.
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Securities and Exchange Board of India
(p) Subsequent to filing the draft Scheme with SEBI, no changes to the draft
Scheme, except those mandated by the regulators or authorities or court or
tribunal, shall be made without specific written consent of SEBI.
4.4.2. The valuation report referred to in paragraph 4.4.1(c) above and the fairness
opinion referred to in paragraph 4.4.1 (e) above shall be provided by a
Registered Valuer and Independent SEBI Registered Merchant Banker
respectively. The Registered Valuer and the merchant banker referred therein
shall not be treated as independent in case of existence of any conflict of
interest among themselves or with the company, including that of common
directorships or partnerships.
4.5. Processing of the Draft Scheme by SEBI
4.5.1. 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.
4.5.2. SEBI shall endeavour to provide its observation letter or no-objection letter on
the draft Scheme within 30 days from the later of the following:
(a) date of receipt of satisfactory reply on clarifications, if any, sought from the
unlisted MII; or
(b) date of receipt of opinion from Independent Chartered Accountant, if any,
sought by SEBI; or
(c) All complaints or comments received by SEBI on the draft Scheme, if any,
shall be forwarded to the unlisted MII, for necessary action and resolution of
the same.
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Securities and Exchange Board of India
5. 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.
6. Applicability: The provisions of this circular shall come into effect from 30th day from
the date of issuance of the circular.
7. This circular is issued in exercise of powers conferred under Section 11(1) of the
Securities and Exchange Board of India Act, 1992 to protect the interests of investors
in securities and to promote the development of, and to regulate the securities markets.
8. This circular is available on SEBI website at www.sebi.gov.in at “Legal Framework -
Circulars.”
Yours faithfully,
Hruda Ranjan Sahoo
Deputy General Manager
Market Regulation Department
Email: hrsahoo@sebi.gov.in
Ph. No.022-26449586
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Securities and Exchange Board of India
Annexure I
Format for Report on Complaints
Part A
Sr. No. Particulars Number
1 Number of complaints received directly
2 Number of complaints forwarded by SEBI
3 Total number of complaints received (1+2)
4 Total number of complaints resolved
5 Total number of complaints pending (3-4)
Part B
Sr. Name of the Complainant Date of Status
No. Complaint (Resolved/Pending)
1
2
3
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Securities and Exchange Board of India
Annexure II
Format of the Compliance Report to be submitted along with the draft Scheme
It is hereby certified that the draft Scheme involving (Name of the entities) does not, in
any way violate, override or limit the provisions of securities laws and the same is in
compliance with the applicable provisions of this circular.
Company Secretary Managing Director
Certified that the transactions / accounting treatment provided in the draft Scheme
involving (Name of the entities) are in compliance with all the Accounting Standards
applicable to an unlisted entity.
Chief Financial Officer Managing Director
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Securities and Exchange Board of India
Annexure III
Format for Report on Unpaid Dues
Sr. Particulars Details of Amount Reason for
No. dues/fine/penalty (INR) non-payment
1. Pending Dues of SEBI
2. Pending Dues of
Depositories
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