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Schemes of Arrangement under the Scanner

Listed Companies made subject to stricter scrutiny and multilevel approvals

-Megha Mittal

(mittal@vinodkothari.com)

With the objective of empowering the stock exchanges and streamlining the processing of draft schemes filed with the stock exchanges, the Securities and Exchange Board of India has issues a Circular dated 3rd November, 2011[1] (“Amendment Circular”) thereby amending the Circular dated March 10, 2017[2] (“March, 2017 Circular”) which lays down the framework for Schemes of Arrangement by listed entities and relaxation under Rule 19(7) of the Securities Contracts (Regulation) Rules, 1957.

The Amendment Circular shall be effective for scheme submitted to the Stock Exchange after 17th November, 2020 and for those companies which are either listed, seeking to be listed or awaiting trading approval after 3rd November, 2020.

Schemes of Arrangement is unarguably a material event for the listed company, and as such, optimum transparency, disclosure by the company, coupled with stringent checks by the Committees, viz Audit Committee and Committee of Independent Directors, becomes a very crucial factor for decision making by the shareholders.

The Amendment Circular primarily aims at ensuring that the recognized stock exchanges refer draft  schemes  to  SEBI  only  upon  being fully convinced that the listed entity is in compliance with SEBI Act, Rules, Regulations and circulars issued thereunder. While the amendments introduced, bring to light the tenet of the regulatory bodies to ensure higher levels of transparency and disclosures with respect to the proposed schemes, there also seems to be an underlying tone of stress and responsibility that has been imposed on the Audit Committee and Independent Directors to assess the viability of the proposed Schemes.

In this article, the author has given a detailed comparison of the provisions, before and after the Amendment Circular, along with comments on the same.

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Out-and-Out Ouster of Ineligible Persons- Liquidation Amendment Regulations, 2020 enact Discussion Paper proposals

-Megha Mittal

(resolution@vinodkothari.com

The Insolvency and Bankruptcy Board of India (“IBBI”/ “Board”) vide Notification No. IBBI/2019-20/GN/REG053, dated 06.01.2020, introduced the IBBI (Liquidation Process) (Amendment) Regulations, 2020 (“Amendment Regulations”) w.e.f. the same day.

In what seems to be an adaptation of the ideas proposed in the Discussion Paper dated 03.11.2019[1], the Amendment Regulations seem to have provided for  “out-and-out ouster” approach towards persons ineligible under section 29A of the Code, in liquidation processes too, thereby imbibing in the Liquidation Process Regulations, the orders of the Hon’ble National Company Law Appellate Tribunal (“NCLAT”) in Jindal Steel and Power Limited v. Arun Kumar Jagatramka & Gujarat NRE Coke Limited (Company Appeal (AT) No. 221 of 2018)[2] and State Bank of India v. Anuj Bajpai (Liquidator) (Company Appeal (AT) (Insolvency) No. 509 of 2019)[3]

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