SEBI Circular on Procedure for seeking prior approval for change in control of Portfolio Managers – 2nd June, 2022

• Regulation 11(aa) of SEBI (Portfolio Managers) Regulations, 2020 provides that a Portfolio Manager shall obtain prior approval of SEBI in case of change in control in such  manner  as  may  be  specified  by  SEBI. Further, SEBI, vide its Circular dated 12^th May, 2021,  the  procedure  for  obtaining  prior approval in case of change in control of Portfolio Managers was specified.

• Further, in order to streamline the process of providing approval to the proposed  change in control of a Portfolio Manager, SEBI modified its Circular dated 12^th May, 2021 as under:

• An  online  application  shall  be  made by  Portfolio  Manager to  SEBI  for  prior approval through the SEBI Intermediary Portal (https://siportal.sebi.gov.in).

• The prior approval granted by SEBI shall be valid for a period of six months from the date of such approval.

• Applications for fresh registration pursuant to change in control shall be made to SEBI within six months from the date of prior approval.

• Pursuant to grant of prior approval by SEBI, in order to enable existing investors/ clients to  take  well  informed  decision  regarding  their  continuance  or  otherwise with  the  changed  management,  the  portfolio  manager  shall  inform  its existing investors/ clients about the proposed change prior to effecting the same and give an option to exit without any exit load, within a period of not less than 30 calendar days, from the date of such communication.

• In matters which involve scheme(s)of arrangement which needs sanction of the National  Company Law  Tribunal  (“NCLT”)  in  terms  of  the  provisions  of  the Companies Act, 2013, the Portfolio Manager shall ensure the following:

1. The application seeking approval for the proposed change in control under Regulation  11(aa)shall  be  filed  with  SEBI  prior  to  filing  the  application with NCLT;
2. Upon   being   satisfied   with   compliance   of   the   applicable   regulatory requirements, in-principle approval will be granted by SEBI;
3. The  validity  of  such  in-principle approval  shall  be  three  months  from  the date  of such  approval, within  which  the  relevant  application  shall  be made to NCLT;
4. Within  15  days  from  the  date  of  order  of  NCLT, Portfolio  Manager shall submit an  online  application  in  terms  of  paragraph  2(i)  of  this  Circular along with the following documents to SEBI for final approval:

• Copy of the NCLT Order approving the scheme;
• Copy of the approved scheme;
• Statement explaining modifications, if any, in the approved scheme vis-à-vis the draft scheme and the reasons for the same; and
• Details  of  compliance  with  the  conditions/observations  mentioned in the in-principle approval provided by SEBI.

5. All other  provisions  mentioned  at  paragraph  2(ii)-(iv)of  this  Circular regarding  the  procedure  for seeking  prior  approval  for change  in  control of Portfolio Managers, shall also apply.

• The provisions of this Circular shall be applicable with effect from 15^th June, 2022 to all applications for approval of applications of change in control of Portfolio Manager and Circular dated 12^th May, 2021 shall stand superseded with effect from the date of applicability of this Circular.

Link to the Circular:

https://www.sebi.gov.in/legal/circulars/jun-2022/procedure-for-seeking-prior-approval-for-change-in-control-of-portfolio-managers_59504.html