SEBI has issued a circular dated March 10, 2017, as amended by circular dated March 23, 2017, (‘Scheme Circulars’) which replaces the circular dated November 30, 2015 issued by SEBI in relation to the regulatory framework on schemes of arrangement, amalgamation and capital reduction involving listed companies (‘2015 Circular’). Some of the key changes brought about by the Scheme Circulars are:
i. The Scheme Circulars will now not apply to schemes that solely provide for merger of a wholly owned subsidiary with the parent company. However, such draft schemes will have to be filed with the stock exchanges by way of disclosures and the stock exchanges are required to publish the scheme documents on their websites.
ii. The pricing related provisions of Chapter VII of the ICDR Regulations will be followed in case of issuance of shares to a select group of shareholders or shareholders of unlisted companies pursuant to such schemes. The ‘relevant date’ for the purpose of computing pricing will be the date of board meeting in which the scheme is approved.
iii. The circumstances under which the approval of majority of public shareholders of the listed entity will be required have been expanded to include the following:
a. where a scheme involving merger of an unlisted company results in reduction in the voting share of pre-scheme public shareholders of the listed entity in the transferee/ resulting company by more than 5% of the total capital of merged entity; and
b. where the scheme involves transfer of whole or substantially the whole of the undertaking of the listed entity and the consideration for such transfer is not in the form of listed equity shares.
iv. Listed entity is not required to provide the option of voting by postal ballot and is only required to provide shareholders with the option of e-voting.
v. Schemes of arrangement between listed and unlisted entities will be subject to the following conditions:
a. Percentage shareholding of pre-scheme public shareholders of the listed entity and of the qualified institutional buyers of the unlisted entity in the post scheme shareholding pattern of the resulting company must not be less than 25%;
b. Listed entity must disclose the material information pertaining to the unlisted entity(ies) involved in the scheme in the format specified for abridged prospectus as provided in Part D of Schedule VIII of the ICDR Regulations, as part of the explanatory statement sent to the shareholders while seeking approval of the scheme. Such disclosures are required to be certified by a SEBI registered merchant banker, and are also required to be uploaded on the stock exchange(s) website(s); and
c. Unlisted entities are permitted to merge with a listed entity only if the listed entity is listed on a stock exchange having nationwide trading terminals;
vi. In case of schemes involving the demerger of a division of a listed entity into an unlisted entity and the subsequent listing of the unlisted entity, specific conditions for seeking relaxation of the strict enforcement with respect to listing prescribed by the Securities Contracts (Regulation) Rules, 1957 have been modified as follows:
a. Conditions specified for lock-in of the pre-scheme share capital of the unlisted entity seeking listing are not applicable where the post scheme shareholding pattern of the unlisted entity is exactly same as the shareholding pattern of the listed entity; and
b. Pre-scheme share capital of the unlisted entity seeking listing held by non-promoters shall be locked-in for a period of one year from the date of listing of the shares of the unlisted entity, instead of the three years prescribed earlier;
vii. Subsequent to filing the draft scheme with SEBI, no changes to the draft scheme are permitted except with SEBI’s written consent. However, this requirement is not applicable for changes mandated by other regulators, authorities or by the NCLT; and
viii. The listed entity must pay a fee to SEBI in an amount of 0.1% of the paid-up share capital of the listed / transferee / resulting company, whichever is higher, post sanction of the scheme, subject to a cap of Rs. 5,00,000 (approximately US$ 7,800).
The provisions of the Scheme Circulars are not applicable to schemes already submitted to the stock exchanges, which will continue to be governed by the 2015 Circular.
 The expression has been defined under Section 180(1)(a)(i) of CA 2013 to mean 20% or more of value of the company in terms of consolidated net worth or consolidated total income during previous financial year.