SEBI revises share buyback norms

The Indian market regulator Securities and Exchange Boards of India(SEBI) by a Notification dated September 11, 2018, has published the SEBI (Buy-Back of Securities) Regulations, 2018 replacing the SEBI (Buyback of Securities) Regulations, 1998. These Regulations shall be applicable to buy -back of shares or other specified securities of a company in accordance with the applicable provisions of the Companies Act, 2013. In order to simplify the language, removing inconsistencies, updating the references to the Companies Act, 2013 or other SEBI Regulations; SEBI has undertaken a public consultation process for reviewing the SEBI (Buy-Back of Securities) Regulations, 1998. Some of the important provisions brought by this Regulations are as follows-
1. Meaning of Buyback Period: In order to provide clarity, “buy Back period” has been defined as to mean the time between the date of authorisation for buyback by a company and the date on which the payment is made to shareholders who have accepted the offer.
2. Maximum limit of buy-back of securities: The new Regulation has set the maximum limit of any buy-back shall be twenty-five percent or less of the aggregate of paid-up capital.
3. A ratio of the aggregate of secured and unsecured debts: The new Regulation provides that the ratio of the aggregate of secured and unsecured debts owed by the company after buy-back shall not be more than twice the paid-up capital and free reserves.
4. Fully paid up securities: All shares or other specified securities for buy-back shall be fully paid-up.
5. Reduction of share capital: A company shall not allow buy-back of its shares unless the consequent reduction of its share capital is affected.
6. Buyback undertaking: Buyback can be undertaken through:
a) its free reserves;
(b) the securities premium account; or
(c) the proceeds of the issue of any shares or other specified securities
7. Restrictions on the purchase of own shares or securities: No company shall directly or indirectly purchase its own shares through any subsidiary company including its own subsidiary companies; or through any investment company.
8. Approval for buyback: A company is authorised to have buyback where a special resolution has been passed at a general meeting of the company authorizing the buy-back.
9. Max time limit to complete the buy-back process: Every buy-back shall be completed within a period of one year from the date of passing of the special resolution at general meeting or resolution passed by Board of Directors.
10. Filling of buyback return: After completion of buyback, the company shall file a return containing such particulars relating to the buy-back within thirty days to the Registrar of Companies.
11. Participation of an eligible public shareholder, who does not receive the tender offer: Even if an eligible public shareholder does not receive the tender offer/offer form, he may participate in the buy-back offer and tender shares. This provision has relieved the interest of bona-fide public shareholders.
12. Rights of an unregistered shareholder to participate in the buy-back process: An unregistered shareholder may also tender his shares for buy-back by submitting the duly executed transfer deed for transfer of shares in his name, along with the offer form and other relevant documents.
13. SEBI’s power to allow tendering of shares by company: The amendment makes the company responsible for facilitation of the tendering of shares and its settlement through the stock exchange mechanism. Earlier the responsibility was only limited to the promoters/ acquirer.
14. Maintenance of register of buyback securities: the company shall maintain a register of the shares or securities so bought, the consideration paid for the shares or securities, the date of cancellation of shares or securities, the date of extinguishing and physically destroying the shares or securities. Previously, maintenance of this register was not a mandate.

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