The Securities and Exchange Board of India (SEBI) on Monday revised rules for merger and amalgamation of companies, which requires stricter valuation of entities.
In the recent past, SEBI said it “received applications seeking exemption from certain entities containing inadequate disclosures, convoluted schemes of arrangement, exaggerated valuations, etc.”
SEBI is of the view that granting listing permission or exemption from the requirements based on such applications would not be in the interest of minority shareholders. At the same time, if listing permission or such an exemption is delayed or denied, it would add to the uncertainty and would deprive shareholders of an exit opportunity.
SEBI asked listed companies to place before its audit committee the valuation report obtained from an independent chartered accountant.
The audit committee would furnish a report recommending the draft scheme, taking into consideration of the valuation report.
SEBI has also said that one of the stock exchanges, having nationwide trading terminals, would be the designated stock exchange for the purpose of coordination.
The entities were asked to include the observation letter of the stock exchanges in the notice sent to the shareholders seeking approval of the scheme and bring the same to the notice of the High Court at the time of seeking approval of the scheme.
The stock exchanges were asked to forward the draft scheme to the capital market regulator within 3 working days.
The stock exchanges were also asked to process the draft scheme (including seeking clarifications from company and/or opinion from an independent chartered accountant) and forward their “objection/no-objection” letter on the draft scheme to SEBI. SEBI also asked exchanges to disclose the draft scheme and all the documents on its website. It shall also disclose the observation letter of the stock exchanges on its website within 24 hours of receiving the documents.