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MERGERS AND
ACQUISITIONS UNDER
COMPANIES ACT, 2013 –
SEBI’S PERSPECTIVE
Anubhav Roy, Assistant Legal Adviser,
SEBI
Companies Act, 2013
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Chapter XV (Ss. 230-240)
Other relevant provisions – Ss. 66 (Reduction of
Capital) and 68 (Buy-Back)
Few provisions:
Notice and other documents - SEBI/SEs/News Papers –
for placing on website [230(3)]
 Objection by 10% - Shareholder and 5% - debt holder
 Notice – Various regulators – for giving representation
within 30 days
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Companies Act, 2013
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Order sanctioning scheme to be filed with RoC within 30
days
 Special provisions for M&A of small companies/holdingsubsidiary/such other class or classes of companies as
may be prescribed
 Indian company can also be merged with foreign
companies of notified jurisdictions and vice versa
 Reduction in capital can be in terms of sanctioned scheme
but any buy-back has to be in accordance with the
provisions provided there for
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Companies Act, 2013
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Transferee company to remain unlisted till it becomes listed
If the shareholders of transferor company decides to opt out
of the transferee company, Tribunal may provide for
payment to such shareholders of the value of their shares in
accordance with a pre-determined price formula or after
valuation
Power to acquire shares of shareholders dissenting from
scheme or contract approved by majority
Provisions for purchase of minority shareholding
Liability for offences to continue even after
merger/amalgamation/acquisition
SEBI’s Perspective
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To protect the interest of investors and develop and
regulate securities market
Scheme/arrangements should be fair and transparent
Scheme of arrangement of Sterlite Industries Limited
Introduction of 24(f), (g) and (h) in the Equity Listing
Agreement
Prior filing of schemes/petitions with SE for approval
 Scheme/petition not in violation of Securities Laws/SE
requirements
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Process for seeking exemption
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Co. submits
Scheme with
SEs
Pursuant to
shareholders
approval, Hon’ble
High Court approves
Scheme
SEs grant NOC
to Scheme
Co. submits the
Scheme with
Hon’ble High
Court
Co. submits approved
Scheme with the SEs
Meeting of
shareholders
convened as
per directions
of Hon’ble HC
SEs recommend the
application of the
Co. and submit the
same with SEBI for
exemption
SEBI’s Perspective
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Judicial treatment of Amendments made to Equity
Listing Agreement in some cases
Cornershop Entertainment Co. Pvt. Ltd. (Bom. HC)
 Chemidye Manufacturing Co. Pvt. Ltd. (Bom. HC)
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Clause 8.3.5 of DIP Guidelines (since rescinded)
Circular dated 03.09.2009
Scheme submitted with SEBI after approval by Hon’ble High
Court.
Demerger of divisions, wherein core business transferred to
subsidiary.
SEBI’s Perspective
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Related Party Transactions
Increase in promoter shareholding.
Resultant company listed solely on RSEs
Voting – present and voting.
Lack of disclosures – Scheme, Valuation report,
financials of unlisted company not disclosed in public
domain
SEBI’s Perspective
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SEBI Circular dated 04.02.2013
Circular dated 21.05.2013
All schemes of arrangement under Part IV and Chapter V
of Part VI of the Companies Act, 1956
 Filing of Draft Scheme with Designated Stock Exchange
along with recommendation Report of Audit Committee
based on the valuation report of an independent CA
 Draft scheme also to be placed on the website of listed
company and of SEs where shares are listed/proposed to
be listed
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SEBI’s Perspective
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DSE can seek clarification from company/opinion from
independent CA
 DSE to forward the draft scheme to SEBI within 3 days
 DSE to forward its objection/no-objection to SEBI within
30 days
 SEBI
can
seek
clarification
from
any
person/company/opinion from independent CA/grant of
in-principle approval for listing
 All complaints received by SEBI be sent to DSE for
resolution by listed company
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SEBI’s Perspective
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“Complaints Report” within 7 days of expiry of 21 days
from the filing of draft scheme with SE
 SEBI to give its comments to DSE within 30 days of receipt
of Objection/No-Objection/opinion from independent
CA/satisfactory reply on clarification sought by SEBI
 Within 7 days SE to issue observation letter to listed
company after incorporating comments of SEBI (6 months
validity)
 Within 24 hrs observation letter be disclosed on website
of listed company and on the website of SEs
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Listed company to ensure that final scheme presented
before HC provides for shareholders approval through
sp. Resolution, in cases of – (i) allotment of additional
shares to promoter group, RPT etc. (ii) where one of the
party to scheme is promoter group, RPT, etc. and (iii)
where subsidiary is being merged in parent and the
parent had in the past acquired shares of such subsidiary
by paying cash to those shareholders of such subsidiary
who happens to be promoter/promoter group of such
parent company
 Notice to shareholders to include observation letter of SE
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SEBI’s Perspective
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Observation letter to be brought to the notice of the
Hon’ble HC by Listed company
 Final sanctioned scheme along with certain documents to
be submitted to SE
 SE to send the scheme to SEBI with its recommendation
 SEBI to offer its comments/approval within 30 days.
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SEBI’s Perspective
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Co. submits
Draft Scheme
with SEs
Draft Scheme along
with
various
documents submitted
with
SEBI
by
Designated SE
SEs submit NOC
& Complaints
Report with SEBI
SEBI furnishes its
comments to SEs
SEs furnish
Observation
Letter
Co. submits the
Scheme with the
Hon’ble High
Court
SEBI’s Perspective
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T day
• Co. submits Draft Scheme with SEs
T+3
• Draft Scheme along with various documents submitted with SEBI by
Designated SE
T + 30 / T +21
• SEs submit NOC & Complaints Report with SEBI
T + 30 / T +21
• SEBI furnishes its comments to SEs
Advantages in revised process
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Improved quality of disclosures
Disclosure of information on websites
SEBI can seek clarifications and suggest further
disclosure / modification
Disclosure of Related Party Transactions
Shareholders can take well-informed decisions
Timely clearance after Scheme is approved by the
Hon’ble High Court.
Saving time and resources on litigation.
Disclaimer
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Views expressed in this presentation are of the
speaker and for academic purposes only. The views
expressed herein do not necessarily represent the
views/stand of SEBI on the issues dealt.
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Thanks