Scheme of Arrangement
A court-supervised process under company law for restructuring a company's capital, mergers, demergers or compromises with creditors.
How it is identified
Test: the scheme is approved by the required majorities of shareholders and creditors and sanctioned by the National Company Law Tribunal
Unit
qualitative
In depth
The scheme is the legal vehicle through which most Indian corporate restructuring happens, and its approval requirements are what protect minority shareholders and creditors from a restructuring designed for the majority. For listed companies SEBI adds requirements including a fairness opinion, exchange no-objection, and in many cases approval by a majority of the minority public shareholders voting. The documents filed are public and contain the valuation reports that justify the swap ratio, which is the most informative material available on the deal. Timelines run to a year or more, during which the announced terms can change.
Worked example
A scheme requires approval by 75% in value of shareholders present and voting. For a listed company it may also require that public shareholders voting in favour exceed those against — a separate test the promoters' own votes cannot satisfy.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Scheme of Arrangement” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.