Sebi seeks disclosure by firms before M&As

Requirement may be added to listing agreements

The Securities and Exchange Board of India (Sebi) has asked companies going in for schemes of arrangement prior to mergers and acquisitions (M&A) to make further disclosures.

Sebi today directed that companies should make these additional disclosures in the notices sent to shareholders. The Sebi requirement will be formally incorporated in the exchange's listing agreement.

The proposed disclosures include the details about the companies in the proposed scheme of arrangement and the extent or manner in which the companies are related to each other.

The disclosure should also contain the shareholding pattern of the companies concerned, clearly indicating the shareholding its promoters and by persons other than promoters.

Any change in the shareholding pattern before and after the proposed arrangement should also be clearly indicated along with the management's views on the change in the public holding, Sebi has demanded.

The regulator requires the management of the proposed acquirer to explain to the shareholders how the proposed scheme will affect shareholders of the affected companies.

Corporates should also give details about the line of business, the dates of agreement with other companies which are party to the scheme of arrangement, along with detailed profile of the directors.

Companies are also required to disclose names of the subsidiaries, group companies and companies with which the promoters of the resultant company are associated, while in the case of a scheme of arrangement resulting in the merger of one company into another, they would have to indicate whether there would be a change of control in the resultant company against the issuing company.

Audited financial statements of the companies for the last three years including the latest audited financial statement and material development after the date of the last balance sheet are the other details being sought.

Sebi also requires companies to declare details about the scheme, the basis of valuation, the consideration payable or receivable under the scheme, the time schedule within which the shares are to be surrendered or received and payments made or received.

Further, the companies have to furnish a full time-line which should include "" the date of effect of the scheme, details of approvals, dates of board meetings when the proposal was considered and approved and any other details deemed necessary for information to shareholders.

Sebi said all this information was necessary to enable shareholders to make an informed decision about the proposed scheme, including those required under Section 393 of the Companies Act 1956.

Issuing the recommendations, Sebi said that companies undergoing restructuring under Sections 391 & 394 of the Companies Act 1956, have not been providing sufficient information in the notice or explanatory statement.

The details sought

---

• Information on companies in the proposed scheme of arrangement and the way they are related.
• The shareholding pattern of the companies concerned. Any change in the pattern before and after the proposed arrangement should also be clearly indicated
• The acquirer must explain how the scheme will affect shareholders.