Securities and Exchange Board of India (SEBI) is constantly making efforts to bring in fresh wave of changes to Indian capital market regulations. The underlying objective is to build a robust capital market system for ease of compliance for companies and investors and to prevent unfair trade practices.
In line with this approach, SEBI has introduced certain new rulings with respect to:
(i) Appointment and removal of independent directors; and
(ii) Scheme of arrangement with respect to non-convertible debt securities or non-convertible redeemable preference shares.
Independent directors:
With an intent to bring about more flexibility in the process of appointment or removal of independent directors, SEBI has amended LODR (Listing Obligations and Disclosure Requirements) Rules to introduce another alternative to the existing process.
Under the new option, appointment and removal of independent directors will be contingent on two aspects (i.e threshold for (i) ordinary resolution and (ii) majority of minority shareholders).
In the existing regime, passing of special resolution by Board (i.e more than 75% of company board’s approval is needed) is a must to perform any appointment, re-appointment or removal of independent directors.
With addition of new option, failure to pass special resolution at board level would open another windows to test a new option (passing criteria for ordinary resolution and for majority of minority shareholders). Thus, at a meeting conducted for appointment or removal of independent directors, if board fails to pass a special resolution, but succeeds in passing an ordinary resolution and resolution for majority of minority shareholders, then it will be deemed the meeting is successful in the appointment or removal of independent directors.
Scheme of Arrangement
A new requirement introduced by SEBI is that a no-objection certificate has to be obtained by filing draft scheme of arrangement with stock exchanges by entities having listed non-convertible debt securities or non-convertible redeemable preference shares, if such entity intends to pursue scheme of arrangement.
However, this requirement is qualified by two conditions:
(i) the fee paid for obtaining no-objection certificate is non-refundable; and
(ii) the said application has to be filed before submitting scheme of arrangement before national company law tribunal (“NCLT”) for approval.
The said no-objection certificate comes with a valid of six months.
In simple, no scheme for arrangement will be submitted to NCLT without obtaining no objection certificate from relevant stock exchange. Once a no-objection certificate is obtained it has to be filed within the said six months with the NCLT.
Another interesting new addition is any amount pertaining to non-convertible securities issued by listed entities deposited with any escrow would be transferred to the Investor Protection and Education Fund created by SEBI if said amount remains unclaimed for a period of more seven (7) years.
Source : The Hindu
