NSE Issues SOP for Scheme of Arrangements

Background

Based on the advice of SEBI, NSE has issued the Joint Standard Operating Procedure (SOP) on 31 July 2025 vide Circular Ref No: NSE/CML/2025/32 for application filed under Regulation 37 and 59A of SEBI (Listing Obligation and Disclosure Requirements) Regulations, 2015 w.r.t. Scheme of Arrangements which would be effective from 1st August, 2025. The SOP’s have laid down the timelines for the companies and the stock exchanges to revert on the application and follow on queries. NSE also issued FAQs to clarify the requirements in the valuation report, the Scheme of Arrangement and other key points which are captured in our publication below.

SOP for Application filed under Reg 37 and Reg 59A of LODR Regulations 2015

Applicability:

Covers all listed entities proposing a Scheme of Arrangement that requires prior Stock Exchange clearance before filing with any Court/Tribunal (e.g., NCLT) under Sections 230–234 of Companies Act, 2013.

Process:

Under Regulations 37 and 59A of the SEBI (LODR) Regulations, 2015, any listed entity proposing a Scheme of Arrangement must first file the draft scheme with the stock exchange(s) to obtain a No-Objection Certificate (NOC) before approaching any Court or Tribunal under the applicable provisions of the Companies Act, 1956 or 2013. The application is to be submitted through designated online portals ie NEAPS for NSE, Listing Centre for BSE, and MyListing Portal for MSE along with all required documents as per the exchange’s checklist. The links for the checklists are given below:

The exchanges shall review the submission within seven working days, forward it to SEBI for an Observation Letter, and once all queries are resolved, issue the NOC in coordination with SEBI. The Observation Letter and NOC enables the company to proceed with filing the scheme before the Court or Tribunal. Relevant SEBI circulars, regulations, and exchange guidelines govern the process and are periodically updated.

Timeline for NOC and Observation Letter under Reg. 37/59A of SEBI (LODR) Regulations, 2015

SOP for Scheme of Arrangement w.r.t. Relaxation under Rule 19(7) of SCRR, 1957

Applicability:

For NCLT-approved Schemes where shares of an unlisted transferee entity are allotted to shareholders of a listed transferor entity and the company seeks direct listing via relaxation under Rule 19(7).

Process:

Companies must register on the respective exchanges’ online portals and submit the complete set of documents for a 19(2)(b) application. Exchanges review applications within 7 working days, grant in-principle approval, and forward to SEBI for exemption. After receiving SEBI exemption, the company files for final listing and trading approval.

Timeline for Regulation 19(2)(b) of SCRR — In-Principle Approval

Final Listing and Trading Approval

Key FAQ’s on Scheme of Arrangement

NSE has issued FAQs (Frequently Asked Questions) to offer a simple explanation/clarification to the concepts of the circular. These FAQs are available at NSE’s official website.

However, for ease of reference, we have reproduced below certain key FAQs that pertain to valuation requirements, scheme of arrangement procedures, and associated regulatory considerations.

1. Time period within which the Board of Directors of the company shall approve the Scheme?

The board of directors shall approve the scheme of arrangement within 7 working days of the issuance of valuation report by the registered valuer.

2. Financials to be considered by the valuer in its valuation report while deriving the share exchange ratio of the Companies involved in the Scheme?

The Valuer is required to consider the audited financials of last 3 years of listed and unlisted company(ies) involved in the Scheme of Arrangement. These financials shall not be older than 3 months while considering methods prescribed for valuation.

Notes –

1. While considering financials, only audited financial needs to be considered for unlisted Companies. However, in case of listed companies, the valuer can consider limited review financials.
2. In case Valuer is using Discounted Cash Flow Method as one of approaches for valuation purpose for the companies involved in the scheme (Listed and/or unlisted companies), the industry growth rate used shall be provided along with source of same available in public domain. Further, the valuer shall provide justification along with supporting for the deviation in the projected growth rate considered compared to the industry growth rate. The valuer shall also provide detailed justification along with basis of future projection considered by the valuer along with comparison with the past performance of the Company.

3. Approaches to be considered by the valuer in computation of fair share exchange ratio?

While commenting on the fair exchange ratio, the valuer is required to consider all the three approaches mentioned in the SEBI Master Circular i.e. Asset approach, Income approach, Market approach. If a particular approach is not considered, the valuer is required to state the valid reason for not using that approach, merely stating that the price sensitivity or non-availability of information from the management in providing the data shall not be acceptable.

In case comparable companies’ method is used under the market approach by the valuer, the names of the companies with whom it is compared shall be included in the report along with the parameters or working of basis of comparison. Further, the rationale for assigning different weightage to each of such comparable companies should be listed.

In case comparable transaction method is used under the market approach by the valuer, the details of the transaction entered into by the companies with whom it is compared shall be included in the report along with the parameters or working of basis of comparison. Further, the rationale for assigning different weightage to each of such comparable companies should be listed.

In case market price method is used, where a listed company is issuing shares to the shareholders of unlisted companies, it shall follow the pricing provisions of Chapter V of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018, as amended from time to time (hereinafter referred to as “the ICDR Regulations”). Also, the working of same needs to be a part of the valuation report.

4. Is Valuation report applicable for all cases of Scheme of arrangements filed with the Exchanges?

Valuation Report is not required in cases where there is no change in the shareholding pattern of the listed entity / resultant company (as prescribed in SEBI Master Circular). However, please submit certificate of non-applicability of the valuation report in conformity with the SEBI Master Circular.

5. Relevant date for computing the price under the market approach?

The ‘relevant date’ for the purpose of computing pricing shall be the date of Board meeting in which the scheme is approved.

6. Whether any clarification obtained on Valuation will be forming part of the valuation report?

It is to clarify that any sort of clarification/justification given by the valuer shall be provided as an addendum to the valuation report which shall also be uploaded on the website of the Exchange.

7. In case of amalgamation, is there any specific requirement in rationale of the scheme?

In case of amalgamation, if transferor and transferee company are in different business, then rationale should clearly state, how the board of directors/audit committee of transferee company contemplates that said amalgamation will result in synergies of businesses. However, if both the companies operate in the same industry, then it will be helpful if non-business synergies are also listed for the benefit of the shareholders.

8. In case there is change in promoter/promoter group post scheme, is there any additional submission to be made to the Exchanges?

Pursuant to the effectiveness of scheme, if there is any re-classification of promoter/promoter group entities involved in the Scheme, the same should be clearly stated in the draft scheme and shall be correctly classified in the post scheme shareholding pattern submitted to Exchanges.

9. In case of draft scheme and board resolution approving the scheme, is there any specific requirement of the Exchanges?

As applicable, the draft scheme (pdf, Machine readable and duly certified) shall include, but is not limited to the following:

1. Rationale of Scheme
2. Conditionality clauses, i.e. the scheme, include details of any other past pending scheme, open offers or any other pending action which may have an impact on the current scheme filed by the Company or the happening/non-happening of the event will have an impact on the continuity of the present scheme.
3. Promoter Reclassification clause
4. E-voting clause
5. Freezing clause before listing
6. Consideration clause
7. Treatment of fractional entitlement
8. Cancellation of shares pursuant to Scheme on account of cross holding or otherwise
9. Paid up capital/ classes of securities
10. Business of Companies involved
11. Disclosures required as per SEBI Circulars (For schemes filed u/r 59A)
12. Dissolution clause

The Scheme along with all other relevant documents shall mandatorily be placed before the Board of directors of the company and shall form part of the Board Resolution approving the scheme. The documented to be placed shall include, but not limited to the following:

1. Draft scheme
2. Consideration
3. Valuation Report
4. Fairness opinion
5. Statutory Auditor Accounting Treatment
6. Non applicability of Para (A)(10)(b) of Part I of SEBI Master Circular
7. Name of Designated Stock Exchange
8. Noting of Recommendation of Audit and Independent Directors Committee