SEBI

SEBI Scheme of Arrangement for Listed NCDs & NCRPS

SEBI Scheme of Arrangement for Listed NCDs & NCRPS

In pursuance of the amendment in SEBI listing regulations 2015 on 14th November 2022, the new regulations were inserted with respect to the schemes of arrangement for listed non-convertible debt securities or non-convertible redeemable preference shares. Henceforth, to bring uniformity in the operational aspects of the scheme of arrangement by entities in the scheme of arrangement for listed NCDs & NCRPS, the SEBI has issued a circular “Scheme of Arrangement by entities who have listed their Non-convertible Debt securities (NCDs) or Non-convertible Redeemable Preference shares (NCRPS)” on 17th November  2022 which is discussed in brief in this article.

Amendment in SEBI (Listing Obligations & Disclosure Requirements) Regulations 2015

The SEBI through a notification, has amended the SEBI Listing Regulations 2015, which inter alia inserted new regulations with respect to the scheme of arrangement for listed NCDS & NCRPS that are discussed below:

Regulation 59A– The Regulation 59A has now mandated that the entities shall present the draft scheme of arrangement for listed NCDs & NCRPS to stock exchanges along with the prescribed fee for obtaining a non-objection certificate (NOC) before filing such scheme with the National Company Law appellate tribunal (NCLT) under Companies Act 2013. The listed entity is then required to place such NOC before the NCLT for sanction. Upon the sanction, the listed entity is then required to place such a scheme along with necessary documents with the stock exchange.

Regulation 94A– The regulation 94A has provided the operational aspect of the stock exchange in issuing the NOC to listed entities. Upon the receipt of the draft scheme of arrangement for listed NCDS & NCRPs by the stock exchange, it is put before the board, who shall decide whether the draft scheme complies with the securities laws. Upon satisfaction, the stock exchange issues the NOC to the listed entities and shall bring the same to the notice of the National Company Law Appellate Tribunal.

However, it is pertinent to mention that according to Regulation 11 of the SEBI (LODR) regulations 2015, a scheme of arrangement/ merger/amalgamation/ reduction of capital/ reconstruction etc., presented to the tribunal shall not in any way violate or override the provisions of securities law and any requirements of the stock exchange.

READ  SEBI (LODR) (Fifth Amendment) Regulations 2021

Applicability of the Circular

The provisions of the circular shall become effective from immediate effect. Further, the circular will apply to all the listed entities who intend to undertake a scheme of arrangement for listed NCDs & NCRPS in accordance with Chapter XV of the Companies Act 2013[1].

Filing Draft Scheme by an Entity That Has Listed Only NCDs/NCRPS

All the entities who have listed only NCDs or NCRPS shall file a draft scheme of arrangement of such listed NCDs or NCRPS as per Regulation 59A of SEBI Listing Regulations 2015, along with specified fees mentioned in Clause 2 of Schedule XI of the listing regulations.  

Filing Draft Scheme by an Entity Who Has Listed both Specified Securities and NCDs/NCRPS

All the entities who have listed both specified securities and NCDs or NCRPS shall file a single draft scheme of arrangement as per Regulations 37 & 59A of the SEBI Listing Regulations 2015. However, the fees shall be paid in terms of clause 1 of Schedule XI of the listing regulations.

Notice to the Listed Entities

The circular has further made it mandatory that the provisions of this circular shall be brought to the notice of all the listed entities and also published the same on their website.

Operational Aspect of the Scheme of Arrangement for Listed NCDs & NCRPS

By way of amendment in the SEBI listing regulation 2015, the SEBI has issued a present circular in order to bring uniformity in the process of making applications to the stock exchange for obtaining a No objection certificate. The listed entity in the process of listing their securities to the stock exchange, shall need to comply with the operational requirements mentioned below:

  • Requirements to be fulfilled by listed entities who undertake a scheme of arrangement or are involved in a scheme of arrangement
  • Requirements to be fulfilled by the listed entity after sanction of scheme or arrangement by NCLT.
READ  Proposed Amendment to SEBI (Alternative Investment Funds) Regulations, 2012

Conclusion

The circular on the operational aspect of the scheme of arrangement for listed NCDs & NCRPS has been issued to support the amendments in SEBI LODR regulations 2015 by inserting Regulations 59A and 94A. The regulations have made it mandatory that listed entities shall present a draft scheme of arrangement for listed NCDs & NCRPS before the stock exchange for obtaining NOC. It is, therefore, necessary that a draft scheme of arrangement shall contain NOC (issued by the stock exchange) before presenting it to the NCLT for sanction. In addition to this, the listed entity shall need to comply with the additional requirements mentioned in the circular, which will be discussed separately in further blogs.

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