The Securities and Exchange Board of India (Sebi) on Tuesday introduced a framework for ‘scheme of arrangement’ by unlisted market infrastructure institutions (MIIs) that include the stock exchanges, clearing corporations and depositories. A scheme of arrangement is a court-approved agreement between a company and its shareholders or creditors.
The new framework will come into effect from April 27.
At present, there is no specific provision for unlisted MIIs to file the draft scheme of arrangement with Sebi prior to filing the application before any court or tribunal.
The unlisted MII involved or about to get into a scheme of arrangement will file the draft scheme of arrangement along with a non-refundable fee with Sebi for obtaining the observation or no-objection letter, before filing such scheme with any court or tribunal.
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.
Among other things, MIIs will have to furnish the draft scheme of arrangement, valuation report by an independent valuer, the audit committee report recommending the draft scheme and the shareholding pattern before and after the implementation of the scheme of arrangement to Sebi.
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Sebi will have to provide its observation letter or no-objection letter on the draft scheme within 30 days from receiving satisfactory reply with respect to the clarifications.
The validity of the observation letter or no-objection letter of Sebi will be for six months from the date of issuance, within which the scheme will be filed with any court or tribunal for approval.