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Companies wishing to get listed after the merger or demerger will now need prior SEBI approval. The move by the regulator was to ensure protection of minority shareholders’ interest.
A circular put up on the SEBI Web site said that such companies looking for exemptions in the past have been submitting inadequate information.
“In the recent past, SEBI has received applications, seeking exemption, containing inadequate disclosures, convoluted schemes of arrangement, exaggerated valuations, etc. SEBI is of the view that granting listing permission or exemption from the requirements based on such applications may not be in the interest of minority shareholders,” the circular said.
Therefore, companies will now need SEBI approval for such schemes or deals along with approval from the stock exchanges and the High Court.
Valuation report
SEBI has also mandated companies to disclose the scheme valuation report obtained from independent chartered accountant, fairness opinion and audit committee's observation on the scheme for public scrutiny.
The company must obtain approval for the deal from at least two-thirds of shareholders through postal ballot or the e-voting system before submission to the High Court for sanction. Simultaneously, the company will submit the required documents to the stock exchanges. For this purpose, they will have to choose one stock exchange for coordinating with SEBI.
The stocks exchanges, on their part, after having processed the documents and the draft scheme will forward their objection/ no-objection certificate to SEBI. This will be done within 30 days of receiving the application or within seven days of receiving the replies on clarifications (if any) sought by them.
After receiving the comments from SEBI, the stock exchanges will issue the ‘Observation Letter’ to the listed company involved in the scheme. This letter would be valid for six months from the date of issuance.
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