Merger / Amalgamation of Membership
Trading members desirous of merging among themselves are requested to refer to Circular No.61, Download Reference No. NSE/MEMB/281 dated June 24, 1997 and Circular No.108, Download Reference No. NSE/MEMB/00595 dated July 31, 1998 and submit the proposal to the Exchange for approval.
The salient features are as follows:
- The dominant promoter group of the merged entity shall comprise of only the dominant Members of the merging Trading Members.
- When two or more individual Trading Members merge to form either a partnership firm or a corporate, the dominant group of partners/shareholders in such emerging Trading Member entity shall comprise of any or all such individual Trading Members
- In case a merger between two or more individual/partnership firms, Trading Members resulting in the formation of a new partnership firm or corporate; the dominant group of partners/shareholders in such emerging firms or corporate Trading Member shall comprise of any or all the dominant partners/shareholders of such merging Trading Members.
- In case of merger between two or more corporate Trading Members, the dominant group of shareholders in such emerging corporate Trading Member shall comprise of any or all the dominant shareholders of such merging Trading Members.
- The merged entity shall at all times consist of at least one or more Members of the dominant promoter group of the merging Trading Members who would hold at least 51% of its total paid up capital (40% in case of listed companies)/profit sharing ratio.
- The scheme of merger shall provide for the appropriation/transfer of the entire amount of security deposits of the extinguishing Trading Members with the Exchange/NSCCL in favour of the merged entity. Such deposits of the extinguishing Trading Members will be refunded to the merged entity only after the expiry of the respective lock in period of each of the extinguishing Trading Members. No interest shall be paid by the Exchange/NSCCL on such deposits. These deposits may however be considered towards net worth/capital adequacy requirements/exposure limits of the merged entity, as also for margin purposes.
- The scheme of merger shall provide that the merged entity shall honour all the financial commitments/obligations/liabilities of all the extinguishing Trading Members that devolved prior to merger or may devolve subsequent to the merger and shall be treated as if it were the liability of the merged entity.
- As soon as the application for merger is filed before the High Court, the extinguishing broking entity should approach SEBI through the Stock Exchange for obtaining prior permission, to the scheme of merger, giving all necessary details of the proposal.
- The emerging entity would be allowed to trade on the registration of the extinguishing entity for a period of 45 days. However, the emerging entity should apply to SEBI at the earliest and give an undertaking to be liable for the act of the extinguishing entity and such applications in any case should be made not later than 30 days of the registration granted by the Registrar of Companies to the emerging entity.