Scheme of Arrangement – Revised requirements for the stock exchanges and listed companies

we had the opportunity to provide a brief analysis here
on SEBI’s new circular on the topic.
In the
following post, Yogesh Chande points
to some ambiguities regarding the scope of SEBI’s new circular. Yogesh is a Consultant,
Economic Laws Practice, Advocates & Solicitors. Views expressed by the
author are personal]
This post pertains to
the circular issued by Securities and Exchange Board of India (SEBI)
on 4 February 2013 (2013 Circular)[1]
titled “Scheme of Arrangement under the
Companies Act, 1956 – Revised requirements for the Stock Exchanges and Listed
Companies”, rescinding circular dated 3 September 2009 (2009
The 2013 Circular,
provides for stringent requirements to be followed like:
(a) seeking comments of
SEBI on the draft scheme; and             
(b) a special resolution
of the company is passed by postal ballot and e-voting approving the scheme
where: (i) at least three-fourths of the total number of votes and (ii)
two-thirds of the total number of votes cast by public shareholders are
in favour of the resolution.
The 2009 Circular [Clause
8.3.5 of the erstwhile SEBI (Disclosure and Investor Protection) Guidelines,
2000] never had within its purview, a petition involving “capital reduction”
under section 100-101 of the Companies Act, 1956 (Act). However,
the 2013 Circular also makes reference to “capital reduction” in clause A (5.1)
on page 2 and also in clause 2(a) of part A of Annexure I on page 6.
Though the 2013 Circular
rescinds the 2009 Circular, it is not clear whether the intent is also to bring
within its purview the following, which though attracts the provisions of
clause 24(f) of the equity listing agreement[3],
but does not warrant seeking exemption of SEBI under rule 19(7) of SCRR:
(a) petition under
section 101 (capital reduction) not involving allotment of shares; or
(b) scheme involving
amalgamation of an unlisted company with a listed company, which results in
further allotment of shares by the listed company.

Hopefully, we can
expect some clarity on the above from SEBI or stock exchanges.

– Yogesh Chande

Update – May 22, 2013: SEBI has since clarified that the circular is applicable to all types of schemes of arrangement and not only those that require an exemption under Rule 19(7).

[3] The company agrees that it shall file any
scheme/petition proposed to be filed before any Court or Tribunal under
sections 391,394 and 101 of the Companies Act, 1956, with the stock exchange,
for approval, at least a month before it is presented to the Court or Tribunal.

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.


  • Yogesh, thanks for your post. Although the initial part of SEBI's new circular refers to reverse listings and the 2009 circular, the operative portion relates to schemes of arrangements in general (including reduction of capital and mergers into listed companies as you have pointed out). If that is so, then clause 24(f) and (g) would have to be amended to reflect this new position, and it remains to be seen whether SEBI will initiate amendments on that count.

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