Stock market regulator Securities & Exchange Board of India (Sebi) today, 25 June 2013, announced a number of changes with respect to buyback of shares from the open market through stock exchange mechanism. Sebi said that the mandatory minimum buy-back has been increased to 50% of the amount earmarked for the buy-back, as against existing 25%, failing which amount in the escrow account would be forfeited subject to a maximum of 2.5% of the total amount earmarked. The maximum buy-back period for buyback through open market purchases has been reduced to 6 months from 12 months.
Sebi said that companies shall create an escrow account towards security for performance with an amount equivalent to at least 25% of the amount earmarked for buy-back. Sebi also said that the company shall not raise further capital for a period of one year from the closure of the buy-back except in discharge of subsisting obligations as against the existing 6 months. Sebi also said that the company shall not make another buy-back offer within a period of one year from the date of closure of the preceding offer.
The disclosure requirements have been rationalized requiring disclosure of the shares bought back on a cumulative basis on the website of the company and the stock exchange, only on a daily basis instead of the current requirement of disclosure on daily, fortnightly and monthly basis.
Sebi said that a company can buy-back 15% or more of capital (paid-up capital and free reserves) only by way of tender offer.
Sebi said the promoter of the company shall not execute any transaction, either on-market or off-market, during the buy-back period.
The companies are permitted to extinguish shares bought back during the month, within fifteen days of the succeeding month subject to the last extinguishment within seven days of the completion of the offer.
Sebi has also modified the procedure for buy-back of physical shares (odd-lot) which includes creation of separate window in the trading system for tendering the shares, requirement of PAN/Aadhaar for verification, etc.
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