NSE BSE SOP for Merger and Demerger Approvals Explained

NSE BSE SOP for Merger and Demerger Approvals Explained

Faster M&A Clearances Under NSE-BSE SOP – Will the Roadblocks Stay? 

Executive Summary Overview of NSE BSE SOP for Merger and Demerger Approvals

• NSE & BSE’s new Standard Operating Procedure (SOP) for mergers and demergers came into effect on 1 August, promising faster, fully digital processing.
• If documents are complete, review time is targeted at seven working days, compared to the previous 3–5 months.
• Physical paperwork is eliminated; filings will be made digitally through NSE EAPS and BSE Listing Centre.
• Dealmakers welcome the clarity but warn that NCLT delays, rigid timelines, and procedural gaps could still slow transactions.
• Experts suggest parallel NCLT filings and flexibility in exchange response deadlines to improve timelines further.

Definition and Context

The Standard Operating Procedure (SOP) issued jointly by the National Stock Exchange of India Ltd. (NSE) and BSE Ltd. — mandated by the Securities and Exchange Board of India (SEBI) — sets a clear procedural path for approving merger and demerger schemes of listed companies.

Historically, obtaining approvals from stock exchanges and SEBI before approaching the National Company Law Tribunal (NCLT) could take several months, adding uncertainty and delaying deal closures.

The new SOP is intended to:

• Digitise the application process
• Standardise document requirements
• Fix response timelines for each stage

Key Features of the New SOP Key Benefits of NSE BSE SOP for Merger and Demerger Approvals

Process Flow

1. Board Approval – Company’s board approves the merger/demerger scheme.
2. Draft Scheme Filing – Must be filed with the exchange within 15 days.
3. Exchange Review – Two opportunities to respond to deficiencies within strict timelines.
4. Exchange Clearance – Issue of No-Objection Certificate (NoC) or Observation Letter.
5. SEBI Review – SEBI provides regulatory clearance based on exchange recommendations.
6. NCLT Filing – Company approaches NCLT for final sanction.

Opportunities and Benefits

• Predictability – Clear timelines help dealmakers plan capital deployment and investor commitments.
• Digital Efficiency – Removal of physical paperwork reduces administrative delays.
• Common Checklists – Consistency in document requirements across exchanges.
• Faster SEBI Transmission – Quick transfer of approved schemes from exchanges to SEBI addresses a historical bottleneck.

Challenges and Industry Concerns

While the framework is welcomed, several gaps have been highlighted:

NCLT Delays

Even after SEBI and exchange approvals, companies must approach NCLT — a process that remains time-consuming and unpredictable.

Lack of Flexibility

• Exchanges are not explicitly empowered to extend query response deadlines.
• Only two opportunities to respond to deficiencies, even if delays are due to external factors.

Undefined SEBI Timeline

No statutory outer limit for SEBI’s final signoff means overall timelines may still extend.

Technology Risks

System failures or third-party delays may cause restarts of the entire review cycle, with no redressal mechanism provided.

Compliance Advisory for Companies

Estabizz Fintech recommends listed companies and deal advisors to:

• Prepare documentation early to avoid delays in the two allowed response cycles.
• Ensure digital readiness for uploading complete, error-free filings.
• Maintain real-time communication with advisors, auditors, and legal teams for quick responses.
• Pre-plan NCLT strategy, and where feasible, push for parallel proceedings.

Conclusion nse bse sop for merger and demerger approvals

The NSE-BSE SOP is a step forward in modernising and accelerating the M&A clearance process in India.
However, structural reforms such as NCLT process integration, greater flexibility in response timelines, and defined SEBI approval limits will be essential to fully unlock its potential.

📞 For assistance in navigating M&A regulatory clearances under the new SOP, connect with Estabizz Fintech’s corporate compliance experts.

Branded Disclaimer 

This article is published by Estabizz Fintech Private Limited for general information purposes only. It does not constitute legal or financial advice. Readers are encouraged to seek independent professional guidance tailored to their specific circumstances. Estabizz Fintech disclaims liability for any actions taken or not taken based on this publication.

Frequently Asked Questions (FAQs) –FAQs on NSE BSE SOP for Merger and Demerger Approvals

General Understanding

Q1. What is the NSE-BSE SOP for mergers and demergers?
It is a Standard Operating Procedure mandated by SEBI, effective from 1 August 2024, to standardise and speed up the approval process for merger and demerger schemes of listed companies.

Q2. Who issued the new SOP for merger and demerger approvals?
The National Stock Exchange of India Ltd. (NSE) and BSE Ltd., under the mandate of SEBI.

Q3. Why was the new SOP introduced?
To reduce procedural delays, bring predictability to timelines, and digitise the approval process for faster clearances.

Q4. Does this SOP replace NCLT approval requirements?
No. Companies still need NCLT sanction even after SEBI and exchange approvals.

Q5. Is this SOP applicable to all listed companies?
Yes, it applies to all companies listed on NSE or BSE proposing a merger or demerger.

Q6. How long does it take to get exchange approval under the new SOP?
If documents are complete, exchanges must process the application in seven working days.

Q7. What was the timeline before the SOP?
The first stage (exchange and SEBI clearance) could take 3–5 months.

Q8. What is the 15-day filing rule in the SOP?
Companies must file their draft scheme within 15 days of board approval.

Q9. How many times can a company respond to exchange queries?
Only two opportunities are allowed under the SOP.

Q10. How much time do companies get to respond to queries?
Three working days per query round.

Q11. How is the filing done under the new SOP?
Only through digital platforms — NSE EAPS and BSE Listing Centre.

Q12. Is physical submission of documents allowed?
No, the SOP eliminates physical paperwork entirely.

Q13. What documents are required for filing?
Draft scheme of arrangement, board resolution, auditor’s certificate, valuation report, fairness opinion, and other prescribed documents.

Q14. Who can file the application?
The listed entity or its authorised representative (company secretary, compliance officer, or legal counsel).

Q15. Can documents be filed in parts?
No, incomplete submissions may lead to rejection or restarts in the review cycle.

Q16. What is the role of the stock exchanges in the SOP?
Review the scheme, ensure compliance with SEBI guidelines, and issue No-Objection Certificates (NoC) or observation letters.

Q17. What is SEBI’s role in the SOP?
SEBI reviews the scheme based on exchange recommendations and issues final clearance.

Q18. Is there a fixed SEBI approval timeline in the SOP?
No, there is no statutory outer limit for SEBI’s clearance.

Q19. Can SEBI reject a scheme even after exchange approval?
Yes, if SEBI finds compliance gaps or public interest issues.

Q20. How are documents transmitted to SEBI?
Electronically by the exchanges after their review is complete.

Q21. Is NCLT approval still mandatory?
Yes, for all mergers and demergers under the Companies Act, 2013.

Q22. Can companies file with NCLT before SEBI clearance?
Currently no, but experts suggest allowing parallel filings to save time.

Q23. What is parallel NCLT filing?
A suggested process where companies file with NCLT while SEBI review is ongoing, with a commitment to incorporate SEBI’s changes.

Q24. How long does NCLT take for approvals?
Varies widely; could be several months depending on jurisdiction and case load.

Q25. Does NCLT consider SEBI’s comments?
Yes, SEBI’s observations form part of the record before NCLT grants sanction.

Challenges in NSE BSE SOP for Merger and Demerger Approvals

Q26. What are the main challenges in the new SOP?
Rigid timelines, limited response opportunities, undefined SEBI timeline, and lack of redressal for tech failures.

Q27. What happens if a company misses a query response deadline?
The application can be rejected, requiring a fresh filing.

Q28. What if the exchange’s system fails during filing?
Currently, the SOP does not provide a formal redressal mechanism.

Q29. Can exchanges extend the query response timeline?
Not explicitly allowed; experts suggest exchanges should have discretion to extend on request.

Q30. Could the SOP slow down approvals in some cases?
Yes, if companies struggle to meet strict deadlines or face system-related issues.

Q31. How should companies prepare for SOP compliance?
By pre-preparing complete documentation, aligning internal approvals, and ensuring digital readiness.

Q32. Should companies appoint a compliance advisor for SOP filings?
Yes, to ensure accuracy and speed in submission and query handling.

Q33. Can startups and SMEs benefit from this SOP?
Yes, if they are listed entities planning corporate restructuring.

Q34. Is the SOP relevant for private companies?
No, it applies only to listed companies.

Q35. How can companies avoid rejection under SOP?
Double-check checklist compliance, meet deadlines, and respond promptly to queries.

Regulatory Scope & Impact

Q36. Does the SOP apply to all schemes of arrangement?
Yes, including mergers, demergers, amalgamations, and certain capital reductions.

Q37. Will the SOP reduce overall M&A approval time?
Yes for the exchange/SEBI stage, but NCLT delays may still persist.

Q38. Does the SOP impact investor decision-making?
Yes, predictable timelines can improve investor confidence and planning.

Q39. Are there penalties for non-compliance with SOP timelines?
Not monetary, but procedural lapses can lead to rejection.

Q40. Can the SOP be amended in future?
Yes, based on industry feedback and SEBI’s regulatory updates.

Q41. How does the SOP affect large-cap M&A deals?
It can streamline initial regulatory approvals, benefiting high-value transactions.

Q42. Can companies pre-consult with exchanges before filing?
Yes, but such consultations are informal and non-binding.

Q43. What role do merchant bankers play under the SOP?
They assist in preparing filings, valuations, and ensuring regulatory compliance.

Q44. Will parallel filing require a Companies Act amendment?
Yes, or at least a procedural relaxation from NCLT and SEBI.

Q45. Can SOP timelines override court delays?
No, NCLT operates under its own procedural rules.

Miscellaneous

Q46. Is SOP compliance mandatory or optional?
Mandatory for all eligible schemes post 1 August 2024.

Q47. Can foreign-listed entities benefit from the SOP?
Only if they have an Indian listing.

Q48. How does this SOP interact with SEBI’s LODR Regulations?
The SOP works alongside LODR provisions for corporate restructuring disclosures.

Q49. Does SOP address investor grievance timelines?
No, it focuses only on issuer and regulator processes.

Q50. Where can I read the official SOP document?
On the NSE and BSE websites, under their corporate announcements/regulatory section.

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