On 9th December 2022, the Securities and Exchange Board of India (“SEBI”), issued a circular no. SEBI/HO/DDHS/DDHS-RACPOD1/P/CIR/2022/170 as a clarification (“the clarification”) regarding circular no. SEBI/HO/DDHS/DDHS-RACPOD1/P/CIR/2022/156 dated 17th November 2022 on “Schemes of Arrangement by entities who have listed their Non-convertible Debt securities (NCDs)/Non-convertible Redeemable Preference shares (NCRPS)” (“the circular”). A scheme of arrangement is a legally binding agreement between a company and its shareholders or creditors.
Under the clarification, SEBI stated emphatically that a scheme of arrangement involving just a transaction between a debt-listed firm and its unlisted wholly-owned subsidiary would not be covered by the November operational guidelines. However, to maintain transparency, such a debt-listed firm shall submit the draft scheme of arrangement with stock exchanges. Furthermore, documentation would be made available by the stock exchanges on their websites.
Previously, SEBI altered regulations governing schemes of arrangement, such as mergers and amalgamations by companies that have listed their NCDs or NCRPS. The clarification is issued per the authority granted under Section 11(1) of the SEBI Act, 1992, read with Regulation 101 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, to protect the interests of securities investors, promote the development of the securities market, and regulate it. Furthermore, Chapter XII of the LODR Operational Circular dated 29th July 2022 will be modified.
