Markets regulator Sebi on Friday proposed introducing a framework for ‘schemes of arrangement’ for entities which have solely listed their debt securities.
Scheme of association is a court-approved settlement between an organization and its shareholders or collectors.
Presently, for schemes of association involving merger and amalgamation sure safeguards can be found in LODR (Listing Obligations and Disclosure Requirements) guidelines and Listing Regulations. These are to guard the curiosity of buyers of the entities which have listed specified securities — fairness shares and convertible securities.
There is not any separate framework prescribed for entities which have solely listed debt securities or Non-Convertible Redeemable Preference Shares (NCRPS) underneath Sebi’s NCS guidelines or Issue and itemizing of Non-Convertible securities norms.
In a dialogue paper, Sebi mentioned it’s proposing to convey a few regulatory framework offering for schemes of association for less than debt listed entities within the itemizing rules.
“When a listed issuer undergoes restructuring, it impacts investors, irrespective of the security invested in. Hence a holder of debt securities/ NCRPS’ is impacted as much as a holder of specified securities; this necessitates affording a similar protection to the former,” Sebi mentioned.
The regulatory framework for submitting and processing could be on the identical traces as for entities which have listed specified securities, the place the regulator gives feedback on the schemes of association. Further, these stipulations wouldn’t be relevant to a restructuring proposal permitted as a part of a decision plan by the tribunal underneath the Insolvency Code, as per the session paper.
The Securities and Exchange Board of India (Sebi) has sought feedback on the proposals until June 19.
As on February 2022, round 700 entities have listed solely debt securities and have excellent debt securities listed on the inventory trade.
According to the dialogue paper, the listed entity ought to file the draft schemes of association with trade for acquiring the no-objection letter. This will likely be topic to sure situations.
“The proposed period for processing schemes filed by entities that have listed only debt securities/NCRPS’ and have raised money only by way of a private placement of debt securities/NCRPS’ is proposed to be co-terminus with the filing period of schemes filed with any court or tribunal,” Sebi mentioned.
The entities which have listed debt securities or NCRPS’ by means of a public concern, nevertheless, ought to adjust to the stipulations as to submitting and processing in a fashion just like that of schemes filed by entities with listed specified securities earlier than any courtroom or tribunal.
Stock exchanges ought to ahead the draft scheme of association obtained from the listed entity together with no-objection to Sebi.
Further, Sebi ought to present feedback on the draft scheme, which must be in relation to the listed debt securities/NCRPS’ of such entities to the inventory trade involved. Subsequently, the inventory trade ought to concern a no-objection letter to the listed entity, incorporating the feedback obtained from the regulator.
While processing the draft scheme, Sebi might search clarifications from any individual related on this regard, together with the listed entity or the inventory trade and may additionally search an opinion from an skilled resembling working towards firm secretary, working towards chartered accountant and lawyer.
The validity of the no-objection letter must be six months from the date of issuance. Upon receipt of the letter from the trade, the listed entity ought to be certain that the identical is submitted instantly however not later than two working days from such receipt, to the courtroom or tribunal to keep away from any delay, as per the session paper.
The proposed regulatory framework is anticipated to guard the curiosity of holders of debt securities/NCRPS’ and information such listed entities via a procedural framework.
Source: www.financialexpress.com”