Securities and Exchange Board of India (SEBI) on 20th May, 2022 has released Consultation paper on introducing Framework of Schemes of Arrangement for entities that have listed only debt securities/ NCRPS'.
The term, 'arrangements' has been defined as amalgamation, merger, demerger, etc. which are different from those filed under the Insolvency and bankruptcy code in as much that the former relates to restructuring of companies as opposed to the latter which pertains to bankruptcy resolution. In short, a Scheme of arrangement is a court-approved agreement between a company and its shareholders or creditors.
As on February 2022, around 700 entities have listed only debt securities and have outstanding debt securities listed on the stock exchange. There is no separate framework prescribed for entities that have only listed debt securities or Non-Convertible Redeemable Preference Shares (NCRPS) under Sebi's NCS rules or Issue and listing of Non-Convertible securities norms.
Key Highlights related to the Proposal
- The listed entity should file the draft schemes of arrangement with the exchange for obtaining the no-objection letter (NOL). This will be subject to certain conditions.
- before filing with any Court or Tribunal in case of listed entities that are only debt listed and have raised money by way of a public issue of debt securities/ NCRPS' or;
- at the time of filing them with any Court or Tribunal in case of listed entities that are only debt listed and have raised money only by way of private placements of debt securities/ NCRPS'
- The entities that have listed debt securities or NCRPS' by way of a public issue, however, should comply with the stipulations as to filing and processing in a manner similar to that of schemes filed by entities with listed specified securities before any court or tribunal.
- Stock Exchange(s) shall forward the draft scheme of arrangement received from the listed entity along with No-Objection to SEBI.
- SEBI shall provide comments on the draft scheme, which shall be in relation to the listed debt securities/NCRPS' of such entities to the Stock Exchange(s) pursuant to which the Stock Exchange(s) shall issue No Objection Letter (NOL) to the listed entity, incorporating the comments received from SEBI.
- While processing the draft scheme, SEBI may seek clarifications from any person relevant in this regard including the listed entity or the stock exchange(s) and may also seek an opinion from an Expert such as Practicing Company Secretary, Practicing Chartered Accountant, Lawyer, etc.
- The validity of the NOL shall be six months from the date of issuance. Upon receipt of the NOL from the Stock Exchange(s), the listed entity shall ensure that the same is submitted immediately, but not later than 2 working days from such receipt, to the Court or Tribunal to avoid any delay.
Kindly note that: Timeline to share comments on the proposal: Comments as per aforesaid format may be sent to the following, latest by June 19, 2022 (within 30 calendar days from date of publication of this consultation paper on SEBI website) through the following modes:
- By email to: pradeepr@sebi.gov.in; chaitalik@sebi.gov.in; and kirand@sebi.gov.in or
- By post as well.
The proposed regulatory framework is expected to protect the interest of holders of debt securities/NCRPS' and guide such listed entities through a procedural framework.
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