Knowledge Base

A scheme of arrangement is a court-approved restructuring mechanism that allows a company to make significant changes to its structure such as a merger, demerger, or spin-off in a legally binding way.

The process

The company proposes a scheme and files it with the NCLT (National Company Law Tribunal). Shareholders and creditors vote on it. Once approved by the required majority and sanctioned by the NCLT, it becomes binding on all shareholders including those who voted against it.

Many corporate actions like mergers and demergers in India are executed through this route. When you see the term “scheme of arrangement” in an announcement, it simply means the company is using this NCLT-approved legal framework to carry out the restructuring.

What it means for you

You’ll be notified of the scheme and given the opportunity to vote. Once sanctioned, the changes share swaps, credits, or cancellations are applied automatically to your DEMAT without any further action from your end.