MASTER CIRCULAR
SEBI/HO/CFD/POD-2/P/CIR/2023/93 June 20, 2023
To,
All listed entities
All the recognized Stock Exchanges
Dear Sir / Madam,
Master Circular on (i) Scheme of Arrangement by Listed Entities and (ii) Relaxation
under Sub- rule (7) of rule 19 of the Securities Contracts (Regulation) Rules, 1957
1. Securities and Exchange Board of India (SEBI), from time to time, has been issuing
various circulars/directions which lay down the detailed requirements to be
complied by listed entities while undertaking schemes of arrangements.
2. 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.
3. With the issuance of this Master Circular, the directions/instructions contained in the
Circulars listed out in Schedule I to this Master Circular shall stand rescinded.
4. Notwithstanding such rescission,
4.1. Anything done or any action taken or purported to have been done or taken
under the rescinded circulars, prior to such rescission, shall be deemed to have
been done or taken under the corresponding provisions of this Master Circular;
4.2. any application made to SEBI under the rescinded circulars, prior to such
rescission, and pending before it shall be deemed to have been made under
the corresponding provisions of this Master Circular;
4.3. the previous operation of the rescinded circulars or anything duly done or
suffered thereunder, any right, privilege, obligation or liability acquired,
accrued or incurred under the rescinded circulars, any penalty, incurred
in respect of any violation committed against the rescinded circulars, or any
investigation, legal proceeding or remedy in respect of any such right,
privilege, obligation, liability, penalty as aforesaid, shall remain unaffected as
if the rescinded circulars have never been rescinded;
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5. Recognized Stock Exchanges, Issuers and other stakeholders are directed to:
5.1. comply with the conditions laid down in this circular;
5.2. bring the provisions of this circular to the notice of listed entities/ issuers of listed
Non-Convertible Securities, Securitised debt instruments, and/ or Commercial
Paper;
5.3. disseminate the provisions of the circular on their website;
5.4. put in place necessary systems and infrastructure for implementation of this
circular;
5.5. monitor compliance with the provisions of the circular
5.6. make consequential changes, if any, to their respective bye-laws; and
communicate and create awareness amongst the stakeholders.
6. This Master 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 interest of
investors in securities and to promote the development of, and to regulate the
securities market.
7. This Master Circular is available on SEBI website at www.sebi.gov.in under the
category “Legal -> Master Circulars”.
Yours faithfully
Yogita Jadhav
General Manager
Division of Policy and Development
Corporation Finance Department
Phone +91-022-26449583
Email: yogitag@sebi.gov.in
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Contents
PRELIMINARY ................................................................................................................................... 4
PART - I: Requirements before the Scheme of arrangement is submitted for sanction by
the National Company Law Tribunal (NCLT) .................................................................................. 5
A. Requirements to be fulfilled by Listed Entity .............................................................................. 5
B. Obligations of Stock Exchange(s) ............................................................................................ 14
C. Processing of the Draft Scheme by SEBI ................................................................................ 14
D. Fractional entitlements, if any. ................................................................................................ 15
PART-II: Application for relaxation under Sub-rule (7) of rule 19 of the Securities Contracts
(Regulation) Rules, 1957. ............................................................................................................... 16
A. Requirements to be fulfilled by Listed Entity for Listing of Equity Shares ................................. 16
B. Application by a listed entity for Listing of warrants Offered Along With Non- Convertible
Debentures (NCDs) ................................................................................................................... 19
C. Requirements to be fulfilled by Stock Exchange(s) ................................................................. 20
D. Processing of the Scheme by SEBI ......................................................................................... 20
Annexure I ........................................................................................................................................ 21
Format of the Compliance Report to be submitted along with the draft scheme ........................... 21
Annexure II ...................................................................................................................................... 22
Computation of Fair Share Exchange Ratio .................................................................................. 22
Annexure III...................................................................................................................................... 23
Format for Auditor's Certificate ...................................................................................................... 23
Annexure IV ..................................................................................................................................... 25
Format for Report on Complaints .................................................................................................. 25
Annexure V ...................................................................................................................................... 26
Format for report on unpaid dues .................................................................................................. 26
Annexure VI ..................................................................................................................................... 27
Format of the Compliance Report to be submitted along with the 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 .............................................................................. 27
Schedule I ........................................................................................................................................ 28
List of Circulars/Notifications ......................................................................................................... 28
Page 3 of 28
PRELIMINARY1
1. 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.
2. 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.
3. 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.
4. The Provisions of this circular shall not apply to schemes which solely provide for
merger of a wholly owned subsidiary or its division with the parent company.2
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.
5. 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.3
6. The listed entity shall pay a fee to SEBI at the rate of 0.1% of the paid-up share
capital of the listed/ transferee / resulting company, whichever is higher, post sanction
1 SEBI Circular No. CFD/DIL3/CIR/2017/21 dated March 10, 2017
2 SEBI Circular No. CFD/DIL3/CIR/2017/21 dated March 10, 2017
3 SEBI Circular No. CFD/DIL3/CIR/2017/26 dated March 23, 2017
Page 4 of 28
of the proposed scheme, subject to a cap of Rs.5,00,000.
PART - I: Requirements before the Scheme of arrangement is submitted for
sanction by the National Company Law Tribunal (NCLT) 4
A. Requirements to be fulfilled by Listed Entity
1. Designated Stock Exchange
a) Listed entities shall choose one of the Stock Exchanges having
nationwide trading terminals as the designated Stock Exchange for the
purpose of coordinating with SEBI.
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 shall 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 under this circular. For such
purpose, Stock Exchanges having nationwide trading terminals may
charge reasonable fees from such companies.
2. Submission of Documents5
The Listed entity shall submit the following documents to the Stock Exchanges-
a) Draft Scheme of arrangement/ amalgamation/ merger/ reconstruction/
reduction of capital, etc.;
b) Valuation Report as per Para (4) below; accompanied with an
undertaking from the listed entity stating that no material event impacting
the valuation has occurred during the intervening period of filing the
scheme documents with Stock Exchange and period under
consideration for valuation.6
c) Report from the Audit Committee recommending the Draft Scheme,
taking into consideration, inter alia, 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:
4 SEBI Circular No. CFD/DIL3/CIR/2017/21 dated March 10, 2017
5 SEBI Circular No. CFD/DIL3/CIR/2017/21 dated March 10, 2017, SEBI Circular No. CFD/DIL3/CIR/P/2018/2 dated January
3, 2018 and SEBI Circular No. SEBI/HO/CFD/DIL1/CIR/P/2020/215 dated November 3, 2020
6 SEBI Circular No. SEBI/HO/CFD/DIL2/CIR/P/2021/0000000657 dated November 16, 2021
Page 5 of 28
 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 shareholders
 Cost benefit analysis of the scheme;
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 as per Para (5) below;
h) Detailed Compliance Report as per the format specified in Annexure I
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.
i) Report from the Committee of Independent Directors recommending the
draft Scheme, taking into consideration, inter alia, that the scheme is not
detrimental to the shareholders of the listed entity.
j) Declaration from the listed entity on any past defaults of listed debt
obligations of the entities forming part of the scheme.7
k) No Objection Certificate (NOC) from the lending scheduled
commercial banks/financial institutions/debenture trustees, from not
less than 75% of the secured creditors in value.8
2A. 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 a Registered Valuer and Independent
SEBI Registered Merchant Banker respectively. The Registered Valuer 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.
3. Conditions for schemes of arrangement involving unlisted entities
In case of schemes of arrangement between listed and unlisted entities, the
7SEBI Circular No. SEBI/HO/CFD/DIL2/CIR/P/2021/0000000657 dated November 16, 2021
8SEBI Circular No. SEBI/HO/CFD/DIL2/CIR/P/2021/0000000657 dated November 16, 2021, Circular No.
SEBI/HO/CFD/DIL2/CIR/P/2021/0000000659 dated November 18, 2021 and SEBI/HO/CFD/DIL2/CIR/P/2022/11 dated February 01,
2022
Page 6 of 28
following conditions shall 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 scheme.
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.
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
on a fully diluted basis shall not be less than 25%.9
c) Unlisted entities can be merged with a listed entity only if the listed entity
is listed on a Stock Exchange having nationwide trading terminals.
4. Valuation Report
a) All listed entities are required to submit a valuation report from a
Registered Valuer.10 The valuation report shall contain the workings,
relative fair value per share and fair share exchange ratio in the manner
as provided in Annexure-II.
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.
b) However, Valuation Report is not required in cases where there is no
change in the shareholding pattern of the listed entity / resultant
company.
c) For the limited purpose of this Circular, 'change in the shareholding
pattern' shall mean;
i. change in the proportion of shareholding of any of the existing
shareholders of the listed entity in the resultant company; or
9 SEBI Circular No. CFD/DIL3/CIR/P/2018/2 dated January 3, 2018
10 SEBI Circular No. SEBI/HO/CFD/DIL1/CIR/P/2020/215 dated November 3, 2020
Page 7 of 28
ii. new shareholder being allotted equity shares of the resultant
company; or
iii. existing shareholder exiting the company pursuant to the Scheme
of Arrangement
d) Further, 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'.
For the limited purpose of this Circular, 'resultant company' shall
mean a company arising / remaining after the listed entity undertakes
a Scheme of Arrangement.
5. Auditor’s certificate
a) An auditors’ certificate shall be filed to the effect 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.
Provided that in case of companies where the respective sectoral
regulatory authorities have prescribed norms for accounting treatment of
items in the financial statements contained in the scheme, the
requirements of the regulatory authorities shall prevail.
Explanation – For this purpose, mere disclosure of deviations in
accounting treatments as prescribed in the aforementioned Accounting
Standards and other generally accepted Accounting Principles shall not
be deemed as compliance with the above.
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b) The standard format for auditors’ certificate would be as per Annexure
III.
6. Redressal of Complaints
a) The Listed entity shall 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) as per Annexure IV of this Circular
prior to obtaining Observation Letter from Stock Exchanges on Draft
Scheme.
b) ‘Report on Complaints’ as mentioned above, shall 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 specified under para (2) above on the
websites of Stock Exchanges and the listed entity.
7. Unpaid Dues Report11
a) All listed entities shall 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.
b) In case of unpaid dues / fines / penalties, the listed entity shall submit to
stock exchanges a ‘Report on the Unpaid Dues’ which shall contain the
details of such unpaid dues in the format given in Annexure V to this
Circular, prior to obtaining Observation Letter from stock exchanges on
the draft scheme.
c) The report on unpaid dues as mentioned above, shall be submitted by
listed entity to the stock exchanges along with the draft scheme.
d) 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.
8. 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
11 SEBI Circular No. SEBI/HO/CFD/DIL1/CIR/P/2019/192 dated September 12, 2019
Page 9 of 28
arrangement and all the documents specified under para (2) above on its
website.
b) Listed entity shall also disclose the Observation Letter of the Stock
Exchanges on its website within 24 hours of receiving the same.
9. Explanatory Statement or notice or proposal accompanying resolution
sent to shareholders for seeking approval of scheme
a) The Listed entity shall 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 shall 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
Valuer12 for the listed entity and unlisted entity.
c) The Listed entity shall upload the ‘Report on Complaints’ as provided in
Para 6 (b) and the ‘Compliance Report’ as provided in Para 2 (h) above,
on the company’s website and websites of Stock Exchanges.
10. Approval of Shareholders to Scheme through e- Voting:
a) The Listed entities shall 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
resolution.
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
12 SEBI Circular No. SEBI/HO/CFD/DIL1/CIR/P/2020/215 dated November 3, 2020
Page 10 of 28
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 Scheme.
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;
For the purpose of this clause, the expression “substantially the whole
of the undertaking” in any financial year shall mean twenty per cent
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, 2013.13
For the purpose of this clause, the term 'public' shall carry the same
meaning as defined under Rule 2 of Securities Contracts (Regulation)
Rules, 1957.
c) For all other cases, the requirements stated at para (10)(b) 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 (10)(a) above.
d) The undertaking as referred to in Para (10)(c) above shall be displayed
on the websites of Stock Exchanges and the listed entity along with other
documents submitted, as stipulated under Para (2) above.
e) Any misstatement or furnishing of false information with regard to the
said undertaking would be viewed seriously and liable for punitive action
as per the provisions of applicable laws and regulations.
13 SEBI Circular No. SEBI/HO/CFD/DIL1/CIR/P/2020/215 dated November 3, 2020
Page 11 of 28
11. 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.
12. 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 Debentures (NCDs) and/or Non-Convertible
Redeemable Preference Shares (NCRPS) is envisaged through a Scheme
of Arrangement14
A listed entity, which has listed its specified securities, may seek listing of
NCDs and/or NCRPS issued pursuant to a scheme of arrangement provided
that it has complied with the following provisions:-
a) Eligibility for seeking listing of NCRPS/ NCDs
i. A listed entity which has listed its specified securities may seek
listing of NCDs and/or NCRPS issued pursuant to a scheme of
arrangement only in case where the listed entity is a part of such
scheme of arrangement and such NCDs and/or NCRPS are issued
to the holders of specified securities of such listed entity. Such
scenarios may broadly include the following:
 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 NCDs and/or
NCRPS to the holders of the specified securities of listed entity (i.e.
demerged entity) as a consideration under the scheme of
arrangement.
 A listed entity, which has listed its specified securities,
(amalgamating entity) is merged with another entity (amalgamated
entity), and the amalgamated entity issues NCDs and/or NCRPS
to the holders of the specified securities of listed entity (i.e.
amalgamating entity) as a consideration under the scheme of
arrangement.
ii. It is clarified that only the NCDs and/or NCRPS issued to the holders
of listed specified securities, vide the scheme of arrangement, would
be eligible for seeking listing.
iii. However, if the same series/class of NCDs and/or NCRPS are also
allotted to other investors, other than the allotment done to the
14 SEBI Circular No. SEBI/HO/DDHS/DDHS_Div1/P/CIR/2022/0000000103 dated July 29, 2022 (updated as on December 01,
2022)
Page 12 of 28
holders of listed specified securities as per the scheme of
arrangement, then such NCDs and/or NCRPS would not be eligible
for seeking listing, under the provisions of this Chapter
b) Tenure/ Maturity: The minimum tenure of the NCDs and/or NCRPS shall
be one year.
c) Valuation Report: The Valuation Report, shall include valuation of the
underlying NCDs and/or NCRPS to be issued pursuant to the scheme of
arrangement.
d) Disclosures in the Draft Scheme of Arrangement: The following should
be clearly disclosed in Draft Scheme of Arrangement:-
i. Face Value & Price.
ii. The terms of payment of dividends/Coupon including frequency
etc.
iii. Credit Rating.
iv. Tenure/ Maturity.
v. The terms of redemption viz. amount, date, redemption
premium/discount, and early redemption scenarios, if any.
vi. Other embedded features (put option, call option, dates,
notification times, etc.
vii. Other terms of instruments (i.e. term sheet).
viii. Details of security cover (if secured NCDs).
ix. Details of Debenture Trustee.
x. Any other information/details pertinent for the investors
e) Other Conditions:
i. The captioned issue of NCDs and/or NCRPS is 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 Reserve.
ii. All such NCRPS/NCDs shall be issued in dematerialized form
only.
iii. In case of NCDs, the issuer has appointed/ shall appoint
Debenture Trustee in compliance with the provisions of the
NCS Regulations and the Companies Act, 2013.
iv. In case of secured NCDs, the issuer has created/ shall create
an appropriate charge or security, in compliance with the
provisions of the NCS Regulations and the Companies Act,
2013
v. All the provisions of Chapter II of the NCS Regulations have been/
shall be complied with.
Page 13 of 28
B. Obligations of Stock Exchange(s)
1. The designated Stock Exchange, upon receipt of the Draft Scheme of
Arrangement and documents referred to at part (I) (A) (2) above shall forward the
same to SEBI within three working days.
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. Such Report shall be submitted as per the format specified at
Annexure IV to this Circular.
3. The Stock Exchanges where the specified securities are listed / proposed to be
listed shall also disclose on their websites the documents listed at part (I) (A) (2)
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.15
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. Such report shall be submitted as per the format specified at
Annexure V.16
C. Processing of the Draft Scheme by SEBI17
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
Accountant.
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
15 SEBI Circular No. SEBI/HO/CFD/DIL1/CIR/P/2020/215 dated November 3, 2020
16 SEBI Circular No. SEBI/HO/CFD/DIL1/CIR/P/2019/192 dated September 12, 2019
17 SEBI Circular No. CFD/DIL3/CIR/2017/21 dated March 10, 2017 and SEBI Circular No. SEBI/HO/CFD/DIL1/CIR/P/2020/215 dated
November 3, 2020
Page 14 of 28
b) date of receipt of opinion from Independent Chartered Accountant, if sought by
SEBI; or
c) date of receipt of ‘No-Objection’ letter from the Stock Exchanges.
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 Exchange.
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 entity.
D. Fractional entitlements, if any.18
1. The fractional entitlements, if any, shall be aggregated and held by the trust,
nominated by the Board in that behalf, who shall sell such shares in the market at
such price, within a period of 90 days from the date of allotment of shares, as per
the draft scheme submitted to SEBI.
The listed company shall submit to the designated stock exchange a report from its
Audit Committee and the Independent Directors certifying that the listed entity has
compensated the eligible shareholders. Both the reports shall be submitted within 7
days of compensating the shareholders.
2. The Exchange shall ensure compliance of the above and non-compliance, if any,
shall be submitted to SEBI on a quarterly basis.
3. 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.
18 SEBI Circular No. SEBI/HO/CFD/DIL2/CIR/P/2021/0000000657 dated November 16, 2021
Page 15 of 28
PART-II: Application for relaxation under Sub-rule (7) of rule 19 of the Securities
Contracts (Regulation) Rules, 195719.
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;
Provided that 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.20
c) The transferee entity will not issue/ reissue any shares, not covered under
the Draft Scheme of arrangement;
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
19 SEBI Circular No. CFD/DIL3/CIR/2017/21 dated March 10, 2017
20 SEBI Circular No. CFD/DIL3/CIR/2017/105 dated September 21, 2017
Page 16 of 28
transferee entity at any future date. 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 period.
2. 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:
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 allottees.
3. Additional conditions to be complied after the Scheme is sanctioned by the
Hon’ble High Court or 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
Arrangement21
The application for relaxation under Sub-rule (7) of rule 19 of SCRR for listing of
NCDs and/or NCRPS 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 various regulatory requirements specified in this regard.
4. In case of a scheme involving merger of a listed company or its division into an
21 SEBI Circular No. SEBI/HO/DDHS/DDHS_Div1/P/CIR/2022/0000000103 dated July 29, 2022 (updated as on December 01, 2022)
Page 17 of 28
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 further 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
22 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 clause22.
5. It shall be ensured that steps for listing of specified securities are completed and
trading in securities commences within sixty23 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. This shall provide
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;
22 SEBI Circular No. CFD/DIL3/CIR/P/2018/2 dated January 3, 2018
23 SEBI Circular No. CFD/DIL3/CIR/P/2018/2 dated January 3, 2018
Page 18 of 28
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 time.24
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 VI of the ICDR Regulations;
24 SEBI Circular No. SEBI/HO/CFD/DIL1/CIR/P/2020/215 dated November 3, 2020
Page 19 of 28
b) the issuer is in compliance with all the provisions of Chapter VI of the ICDR
Regulations; and
c) NCDs and warrants shall be traded in the minimum trade lot of one lakh
rupees.
C. Requirements to be fulfilled by Stock Exchange(s)
1. 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.
Page 20 of 28
Annexure I
Format of the Compliance Report to be submitted along with the draft scheme
It is hereby certified that the draft scheme of arrangement involving (Name of the
entities) does not, in any way violate, override or limit the provisions of securities
laws or requirements of the Stock Exchange(s) and the same is in compliance with
the applicable provisions of SEBI (Listing Obligations and Disclosure
Requirements) Regulations, 2015 and this circular, including the following:
Sl. Reference Particulars
1 Regulations 17 to Corporate governance requirements
27 of LODR
2 RReegguullaattiioonns 1 1 of Compliance with securities laws
LODR Regulations
Requirements of this circular
(a) Para (I)(A)(2) Submission of documents to Stock Exchanges
(b) Para (I)(A)(2) Conditions for schemes of arrangement
involving unlisted entities
(c) Para (I)(A)(4) (a) Submission of Valuation Report
(d) Para (I)(A)(5) Auditors certificate regarding compliance with
Accounting Standards
(e) Para (I)(A)(9) Provision of approval of public shareholders
through e-voting
Company Secretary Managing Director
Certified that the transactions / accounting treatment provided in the draft scheme
of arrangement involving (Name of the entities) are in compliance with all the
Accounting Standards applicable to a listed entity.
Chief Financial Officer Managing Director
Page 21 of 28
Annexure II
Computation of Fair Share Exchange Ratio
XYZ Ltd PQR Ltd
Valuation Approach Value per Share Weight Value per Weight
Share
Asset Approach x a y d
Income Approach x b y e
Market Approach x c y f
Relative Value per X Y
Share
Exchange Ratio (rounded off) xx
Page 22 of 28
Annexure III
Format for Auditor's Certificate
To,
The Board of Directors,
…………………………………………………………….
(Name and address of the
Company)
We, the statutory auditors of ……………………………. (name of the listed
entity),(hereinafter referred
to as “the Company”), have examined the proposed accounting treatment specified in
clause
……… (specify clause number) of the Draft Scheme of ………………………………..
(specify the type of Scheme) between ……………………………………….. (names of the
companies/entities involved) in terms of the provisions of section(s)
………………………………… (specify the relevant section(s)) of the Companies Act, 1956/
Companies Act, 2013 with reference to its compliance with the applicable Accounting
Standards notified under the Companies Act, 1956/ Companies Act, 2013 and Other
Generally Accepted Accounting Principles.
The responsibility for the preparation of the Draft Scheme and its compliance with the
relevant laws and regulations, including the applicable Accounting Standards as
aforesaid, is that of the Board of Directors of the Companies involved. Our responsibility
is to examine and report whether the Draft Scheme complies with the applicable
Accounting Standards and Other Generally Accepted Accounting Principles. Nothing
contained in this Certificate, nor anything said or done in the course of, or in connection
with the services that are subject to this Certificate, will extend any duty of care that we
may have in our capacity of the statutory auditors of any financial statements of the
Company. We carried out our examination in accordance with the Guidance Note on Audit
Reports and Certificates for Special Purposes, issued by the Institute of Chartered
Accountants of India.
Based on our examination and according to the information and explanations given to us,
we confirm that the accounting treatment contained in the aforesaid scheme is in
compliance with SEBI (Listing Obligations and Disclosure Requirements) Regulations,
2015 and circulars issued thereunder and all the applicable Accounting Standards notified
by the Central Government under the Companies Act, 1956/ Companies Act, 2013 and/or
Page 23 of 28
the accounting treatment in respect of ………………………. (specify the financial
statement item(s)) as prescribed by………………………………. (name of the regulator)
vide its Notification …………………………. (details of the Notification) which prevail over
the accounting treatment for the same as prescribed under the aforesaid Accounting
Standards (wherever applicable), except the following:
…………………………….
…………………………….
This Certificate is issued at the request of the ……………………………. (name of the
Company) pursuant to the requirements of circulars issued under SEBI (Listing
Obligations and Disclosure Requirements) Regulations, 2015 for onward submission to
the …………………………………….. (name of the Stock Exchange(s)). This Certificate
should not be used for any other purpose without our prior written consent.
For
…………………………………
(name of the Firm)
Chartered Accountants
Firm Registration No.:
Signature
(Name of the member)
Designation (Partner or proprietor, as may be applicable):
Membership Number:
Place:
Date:
Page 24 of 28
Annexure IV
Format for Report on Complaints
Part A
Sr. No. Particular Number
1 Number of complaints receivse d directly
2 Number of complaints forwarded by Stock Exchanges /
3 SToEtBaIl Number of complaints/comments received (1+2)
4 Number of complaints resolved
5 Number of complaints pending
Part B
Sr. No. Name of complainant Date of Complaint Status
1 (Resolved/pending)
2
3
Page 25 of 28
Annexure V
Format for report on unpaid dues
Sr. Particulars Details of Amount Reason for
No. dues/fine non payment
1. Pending Dues of SEBI
2. Pending Dues of Stock
Exchanges
3. Pending Dues of
Depositories
Page 26 of 28
Annexure VI
Format of the Compliance Report to be submitted along with the 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
It is hereby certified that the scheme of arrangement involving (Name of the entities) does
not, in any way violate, override or limit the provisions of securities laws or requirements of
the Stock Exchange(s) and the same is in compliance with the applicable provisions of SEBI
(Listing Obligations and Disclosure Requirements) Regulations, 2015, SEBI Circular No.
CFD/DIL3/CIR/2017/21 dated March 10, 2017, and SEBI Circular No. CIR/IMD/DF/50/2017
dated May 26, 2017, as amended from time to time, including the following:
Sr. Reference Particulars Whether Remarks
No. complied (How
(YES/N) complied)
1 Para 12(A)(i) Eligibility for seeking listing of
NCRPS/NCDs
2 Para 12(A)(ii) Tenure/Maturity
3 Para 12(A)(iii) Credit Rating
4 Para 12(A)(iv) Valuation Report
5 Para 12(A)(v) Disclosures in the Scheme of
Arrangement
6 Para 12(A)(vi) Other Conditions
Company Secretary Managing Director
Page 27 of 28
Schedule I
List of Circulars/Notifications
S. Circular / Master Circular Subject
No. Notification No. and Date
1 CFD/DIL3/CIR/2017/21 Schemes of Arrangement by Listed Entities and (ii)
dated March 10, 2017 Relaxation under Sub-rule (7) of Rule 19 of the Securities
Contracts (Regulation) Rules, 1957
2 CFD/DIL3/CIR/2017/26 Schemes of Arrangement by Listed Entities and (ii)
dated March 23, 2017 Relaxation under Sub-rule (7) of Rule 19 of the Securities
Contracts (Regulation) Rules, 1957
3 CIR/IMD/DF/50/2017 Listing of Non-Convertible Redeemable Preference
dated May 26, 2017 Shares (NCRPS) / Non- Convertible Debentures (NCDs)
through a Scheme of Arrangement
4 CFD/DIL3/CIR/2017/105 Schemes of Arrangement by Listed Entities and (ii)
dated September 21, 2017 Relaxation under Sub-rule (7) of Rule 19 of the Securities
Contracts (Regulation) Rules, 1957
5 CFD/DIL3/CIR/2018/2 Schemes of Arrangement by Listed Entities and (ii)
January 03, 2018 Relaxation under Sub-rule (7) of Rule 19 of the Securities
Contracts (Regulation) Rules, 1957
6 SEBI/HO/CFD/DIL1/CIR/P/2019 Schemes of Arrangement by Listed Entities and (ii)
/192 dated September 12, 2019 Relaxation under Sub-rule (7) of Rule 19 of the Securities
Contracts (Regulation) Rules, 1957
7 SEBI/HO/CFD/DIL1/CIR/P/2020 Schemes of Arrangement by Listed Entities and (ii)
/215 dated November 3, 2020 Relaxation under Sub-rule (7) of Rule 19 of the Securities
Contracts (Regulation) Rules, 1957
8 SEBI/HO/CFD/DIL1/CIR/P/2020 Master Circular on (i) Scheme of Arrangement by Listed
/249 dated December 22, 2020 Entities and (ii) Relaxation under Sub- rule (7) of rule 19
of the Securities Contracts (Regulation) Rules, 1957
8 SEBI/HO/CFD/DIL2/CIR/P/2021 Schemes of Arrangement by Listed Entities
/0000000657 dated November
16, 2021
9 SEBI/HO/CFD/DIL2/CIR/P/2021 Schemes of Arrangement by Listed Entities
/0000000659
dated November 18, 2021
10 SEBI/HO/CFD/DIL1/CIR/P/2021 Master Circular on (i) Scheme of Arrangement by Listed
/000665 dated November 23, Entities and (ii) Relaxation under Sub- rule (7) of rule 19
2021 of the Securities Contracts (Regulation) Rules, 1957
11 SEBI/HO/CFD/DIL2/CIR/P/2022 Scheme of Arrangement by Listed Entities
/11 dated February 01, 2022
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