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SEBI is considering an overhaul of merger norms for listed and unlisted companies, potentially expanding situations that require majority of minority shareholder approval, adjusting contingency provisions, and refining valuation parameters.
This comes as concerns grow around scenarios like promoter shareholding exceeding 75% due to convertible instruments or increased promoter liabilities in listed entities.
For example, in 2018, Fortune Financial's issuance of convertible preference shares was blocked as it would have exceeded the 75% promoter holding threshold. SEBI aims to ensure fairness for public shareholders, especially in complex schemes.
Vaibhav Gupta from Dhruva Advisors highlighted SEBI's cautious approach to complex schemes, noting difficulties in predicting outcomes of contingency schemes which can affect small shareholders.
Manoj Kumar of Corporate Professionals mentioned SEBI's recent scrutiny of valuations, especially when a promoter entity merges with a listed one, suggesting more defined valuation criteria may be introduced.
Currently, majority of minority approval is required in certain promoter-related schemes, where promoters cannot vote.
Binoy Parikh from Katalyst Advisors argues that existing regulations already robustly represent public shareholders' views, but suggests further details on valuation parameters, particularly for related party transactions, could enhance the process.
Past restructuring linked to other commercial parameters might be simplified if it can be demonstrated that promoter holding won’t exceed 75% and valuation reports support any increase in shareholding. This could facilitate complex group restructurings.
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