Guidelines for Reorganization of SEZ Developers and Units
Introduction
This document outlines the latest guidelines concerning the reorganization of Special Economic Zone (SEZ) Developers, Co-developers, and SEZ Units, including changes pertaining to names, shareholding patterns, mergers and de-mergers, constitutional changes, and directorship, as per the provisions articulated in the SEZ Act, 2005.
Background
On October 18, 2021, the Ministry of Commerce and Industry in India rescinded previous instructions and issued new directives to streamline the process for reorganization activities in SEZs. The following sections detail the parameters under which these reorganizations can be approved.
Key Guidelines
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Approval Authority
Reorganizations such as changes in names, shareholding patterns, business transfers, court-approved mergers, demergers, constitutional changes, and changes in directors may be conducted by the Unit Approval Committee (UAC), provided that:
- The Developer, Co-developer, or Unit does not exit the Special Economic Zone.
- The entity continues to operate as a going concern.
- All existing liabilities remain unchanged following the reorganization.
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Safeguards
The following safeguards must be upheld during the reorganization:
- Continuity of Operations: There must be uninterrupted continuity of SEZ activities, retaining all responsibilities and obligations of the reorganized entity.
- Eligibility Compliance: The reorganized entity and its constituents must meet all eligibility criteria, including security clearances.
- Regulatory Compliance: Adherence to Revenue, Company Affairs, and SEBI regulations regarding capital gains, equity changes, and transfers must be observed.
- Financial Reporting: Detailed financial information regarding any change in equity, merger, demerger, amalgamation, or transfer of ownership must be reported to the Member (IT&R), CBDT, Department of Revenue, and the jurisdictional authority immediately.
- Tax Assessment Rights: The assessing officer retains the right to evaluate the tax implications of gains or losses from equity transfers, mergers, demergers, and amalgamations as applicable. Eligibility for deductions under relevant sections of the Income Tax Act, 1961, must also be assessed.
- Compliance with State Laws: The applicant must adhere to relevant state laws, including those governing land lease agreements as applicable.
- Identification Details: Applicants are required to provide their PAN and jurisdictional assessing officer’s information to the CBDT.
- Name Recognition: Changes in names or any arrangements must be accurately reflected in all pertinent records.
Conclusion
These guidelines, approved by the competent authority, aim to provide a clear framework for the reorganization of SEZ Developers and Units, ensuring compliance with legal standards while facilitating smooth operational transitions.