The Hindu Business Line : M&A: SEBI for independent opinion on fair value

Under SEBI’s amendment to Clause 24 of the Disclosure & Investor Protection guidelines, each of the companies involved in a merger has to obtain the opinion of an independent merchant banker on the valuation of the deal.

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Mumbai, Sept. 4 Capital markets regulator SEBI has directed both listed and unlisted companies seeking mergers to get a “Fairness Opinion” from independent merchant bankers on the valuation done by their valuers.

This is to certify whether the valuation done by their valuers is fair or not.

The fairness opinion should be available to shareholders at the time of approving the merger resolution.

Establishing a fair value in any scheme of merger, amalgamation etc has been the very staple of any approval to corporate restructuring, said a legal expert.

Fair valuation has been subject matter of several court cases; the Supreme Court decision in the case of Hindustan Lever Ltd & Hindustan Lever Employees’ Union Ltd versus Controller of Capital Issues pronounced in 1994 sets the benchmark, he said.

According to the above judgment, the process of valuation should not be vitiated by arbitrariness or malafides and it should be fair to the shareholders.

Rights Issue

SEBI has also amended the SEBI (DIP) guidelines and the Listing Agreement to reduce the time duration for a rights issue to 43 days from earlier 109 days.

This was earlier decided by the SEBI Board at its meeting on August 13.

Modifying the Clause 41 of the listing agreement to bring more efficiency in the disclosure of financial results, SEBI has allowed a listed entity two months’ time from the end of a quarter if it is submitting consolidated financial results in addition to submitting quarterly and year-to-date standalone financial results.

A listed company opting to submit both consolidated and standalone financial results shall publish consolidated financial results only, SEBI said.

Also a listed entity would be required to place the limited review report on un-audited financial results before its board of directors only if the variation between un-audited financials and financials amended pursuant to limited review for the same period exceeds 10 per cent.

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