Template Description

The Scheme of Arrangement for Demerger Template is a comprehensive, legally compliant, and professionally structured document drafted under Sections 230 to 234 of the Companies Act, 2013. Designed for Indian companies seeking to reorganize their business through a demerger, this 3-page Microsoft Word-based template facilitates the legal separation of a business division or undertaking and its transfer to a Resulting Company on a going concern basis. It is ideal for corporate restructuring, spin-offs, and M&A transactions involving asset realignment, investment structuring, or operational independence.

Understanding the Scheme of Arrangement for Demerger Template

This template serves as a foundational legal instrument for demergers and contains all statutory elements required by the National Company Law Tribunal (NCLT), the Registrar of Companies (RoC), and other regulatory bodies. It details the business division being demerged, the share exchange ratio, treatment of employees and contracts, approvals required, and the overall implementation process.

Key Features of the Template

1. Defined Legal Framework & Terminology

• Clearly defines Appointed Date, Effective Date, Record Date, Demerged Undertaking, and Resulting Company.
• Enables both listed and unlisted companies to proceed with a structured corporate separation.

2. Capital Structure Disclosure

• Tabular representation of the capital structure (authorised and paid-up) of both Demerging and Resulting Companies, before and after implementation.
• Transparency in impact on equity for shareholders and regulators.

3. Core Scheme Clauses

• Transfer & Vesting: Describes how the demerged undertaking transfers on a going concern basis.
• Share Entitlement: Specifies the share swap or allotment ratio based on a registered valuer’s report.
• Accounting & Tax Treatment: Aligns with Ind-AS and tax neutrality under Section 2(19AA) of the Income-tax Act, 1961.
• Legal Continuity: Preserves contracts, licenses, and permits without requiring novation.

4. Treatment of Stakeholders

• Employees: Continuity of service and employment terms for all employees moving to the Resulting Company.
• Creditors & Legal Cases: Transfer of pending litigations and liabilities to the Resulting Company.

5. Conditions Precedent Checklist: Approvals required from: Board of Directors, Shareholders & Creditors, NCLT, SEBI/Stock Exchanges/RBI (for listed or regulated companies) & Registrar of Companies (for final effectiveness)

6. Timeline of Events (Illustrative): Provides a ready-to-edit table capturing key steps from Board approval to share issuance by the Resulting Company.

7. Miscellaneous Legal Provisions: Includes clauses on withdrawal, cost-bearing, court jurisdiction, and powers to modify the Scheme before implementation.

Conclusion

The Scheme of Arrangement for Demerger Template is a vital strategic and legal document for any company undertaking a statutory demerger in India. It helps in aligning regulatory expectations, ensuring stakeholder continuity, defining shareholding changes, and securing a smooth court-sanctioned transition. With its ready-to-use format, clause-wise breakdown, and compliance-oriented approach, this template significantly reduces drafting time and legal risks, enabling promoters and companies to focus on business transformation objectives.