Scheme of arrangement
Regulation & taxAlso called: Composite scheme
A court- or tribunal-sanctioned corporate reorganisation — a merger, a demerger, a reduction of capital or a composite of these — approved by the required majorities of shareholders and creditors.
In plain terms
The route almost every Indian group restructuring takes. Where a listed company is involved the exchanges and the securities regulator see it first, and the filed documents contain the valuation reports, the swap ratio and the appointed date.
Appointed date
Regulation & taxThe date written into a scheme of arrangement from which the scheme treats the transfer of the undertaking as having taken effect.
In plain terms
It can sit a year or more before the tribunal sanctions the scheme, which is how a financial year you thought was closed gets reopened and re-presented. It is a legal date, not the date the accounting standard starts the restatement from.
Observation letter
Regulation & taxThe letter a stock exchange issues on a draft scheme of arrangement once SEBI has given its comments, without which a listed company cannot take the scheme to the tribunal.
In plain terms
The invisible check in a merger. Objections raised at this stage are generally met by amending the scheme before anybody votes, so the version put to shareholders has already survived one round of scrutiny.
Share exchange ratio
Regulation & taxAlso called: Swap ratio
The number of shares of the surviving company issued for each share held in the company being absorbed under a scheme of arrangement, derived from a registered valuer’s report.
In plain terms
The whole commercial bargain of a merger compressed into two numbers; everything else in the scheme is machinery for delivering it. Any part of your holding that does not divide into whole shares becomes a fractional entitlement paid in cash.