Sebi chairman Ajay Tyagi. Photo: Mint
Sebi chairman Ajay Tyagi. Photo: Mint

Sebi revises share buyback norms

Market regulator says credit rating agencies will not carry out any activity other than rating of securities offered through public or rights issue

New Delhi: The Securities and Exchange Board of India (Sebi) has revised the regulations for share buyback to provide more clarity on the requirement to make public announcements.

Separately, the market regulator said credit rating agencies will not carry out any activity other than the rating of securities offered through public or rights issue. Besides, any activity, other than the rating of financial instruments and economic or financial research, will have to be hived off by the credit rating agency into a separate entity within two years.

Also read: HCL Tech’s 4,000 crore buyback offer to begin September 18

The review of the current buyback norms was done in order to simplify the language, remove inconsistencies and update references to the new Companies Act that came into force in April 2014. In a notification issued on September 11, Sebi said the definition of the buyback period and clarity on the need to make public announcement for the offer after declaration of postal ballot results has been provided in the amended regulations.

Besides, explanation for ‘free reserves’ in line with the Companies Act, 2013 is part of the new framework. According to the notification, the buyback period is defined as the time between date of authorisation for buyback by a company’s board of directors and the date on which the payment is made to shareholders who have accepted the offer.

Another change made was regarding filing the requirement and time for public announcements. Now, a company authorised to do buyback of shares will have to make a public announcement within two working days of its declaration. Two days will be from the “date of declaration of results of the postal ballot for special resolution/board of directors". A company can undertake buyback of shares out of its free reserves and securities premium account, among others.

However, buybacks cannot be made out of proceeds of an earlier issue of the same kind of shares or same kind of other specified securities. Free reserves include securities premium account. Besides, clarity has been provided on timelines with respect to various requirements under buyback regulations.

Also read: Tata Sons may use 12,603 crore TCS windfall to cut debt

New regulations pertaining to buyback and credit rating agency came into effect from September 11. A discussion paper on new buyback regulations was issued in March this year. More than 150 comments were received from various entities on the discussion paper and after taking them into consideration, the revised buyback regulations were prepared.

Also read: Buy-backs may come to PSU stocks’ rescue

Close