Schemes of arrangement: Sebi mulls framework for entities that have only listed their debt securities

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 stated it’s proposing to convey a couple of 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 stated.

The regulatory framework for submitting and processing can 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 accepted 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 alternate.
According to the dialogue paper, the listed entity ought to file the draft schemes of association with alternate 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 stated.

The entities which have listed debt securities or NCRPS’ by the use of a public situation, nonetheless, 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 ought to be in relation to the listed debt securities/NCRPS’ of such entities to the inventory alternate involved. Subsequently, the inventory alternate ought to situation 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 alternate and can also search an opinion from an professional equivalent to training firm secretary, training chartered accountant and lawyer.

The validity of the no-objection letter ought to be six months from the date of issuance. Upon receipt of the letter from the alternate, the listed entity ought to make sure 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 predicted to guard the curiosity of holders of debt securities/NCRPS’ and information such listed entities via a procedural framework.

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