Markets regulator Sebi today issued a new framework for listing of non-convertible debentures (NCDs) and non-convertible redeemable preference shares (NCRPS) following mergers and acquisitions (M&As). A listed company may seek listing of NCRPS/NCDs issued pursuant to a scheme of arrangement only in case where the listed firm is a part of such scheme and such securities are issued to the holders of specified securities of such listed entity, Sebi said in a circular. “Only the NCRPS/NCDs issued to the holders of listed specified securities, vide the scheme of arrangement, would be eligible for seeking listing,” it added.
However, if the same series of securities are also allotted to other investors (other than the allotment done to the holders of listed specified securities as per the scheme of arrangement) then such securities would not be eligible for listing. A scheme of arrangement is a court-approved agreement between a company and its shareholders or creditors. The Securities and Exchange Board of India (Sebi) said that the minimum tenure of such securities would be one year.
The regulator has listed out several documents including face value and price; terms of payment of dividends/coupon including frequency; credit rating; maturity; details about terms of redemption, amount, date, early redemption scenarios that need to be disclosed in Draft Scheme of Arrangement. Sebi, in March, streamlined regulatory framework for scheme of arrangement such as merger and acquisitions by listed firms to check any possible bypassing of norms and prevent companies from seeking direct approval of National Company Law Tribunal (NCLT) for such deals.
Listed entities, desirous of undertaking scheme of arrangement, will have to file the draft scheme with stock exchange for obtaining observation letter or no-objection letter, before filing such scheme with any court or tribunal. Further, stock exchanges have to forward their objection /no-objection letter on such scheme to Sebi, which can also review the scheme and issue necessary observations, within three working days. Immediately upon filing of the draft scheme of arrangement with bourses, the listed entity will have to disclose such scheme along with all the documents on its website. They will also have to disclose the observation letter of exchanges on its website within 24 hours of receiving it.