Fairness Reports for Mergers

In a change announced last week, SEBI has amended the listing agreement making it mandatory for companies involved in merger transactions to obtain a fairness opinion. SEBI describes the highlights of this amendment as follows:

1. “Fairness Opinion” of independent merchant banker:

In order to safeguard the interest of shareholders, the listed company as well as the unlisted company which are getting merged shall each be required to appoint an independent merchant banker for giving a fairness opinion on the valuation done by valuers. Further, the “Fairness opinion” of the merchant bankers shall be made available to the shareholders at the time of approving the resolution under Clause 24.”

This adds to the existing requirements developed through case law regarding valuation aspects of merger transactions. We have discussed the implications of a fairness opinion in an earlier post.

On a separate note, the listing agreement also carries certain amendments pertaining to reporting of financial information by listed companies.

About the author

Umakanth Varottil

Umakanth Varottil is an Associate Professor at the Faculty of Law, National University of Singapore. He specializes in corporate law and governance, mergers and acquisitions and cross-border investments. Prior to his foray into academia, Umakanth was a partner at a pre-eminent law firm in India.

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