Repealing the Securities and Exchange Board of India (Buy-Back of Securities) Regulations, 1998, SEBI has recently notified new Securities and Exchange Board of India (Buy-Back of Securities) Regulations, 2018 (2018 Regulations).
The 2018 Regulations are effective 11th September, 2018.
The 2018 Regulations have been brought in to simplify the language, remove inconsistencies and update the references to the new Companies Act, 2013 which came into force in April 2014.
Key Highlights of the 2018 Regulations are as follows:
- As per the 2018 Regulations, 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.
- Explanation for ‘free reserves’ is added in line with Companies Act, 2013 as a part of the 2018 Regulations.
- Separate provisions have been framed explaining the disclosures, filing requirements and timelines for public announcement forbuy-back through tender offer, buy-back through stock exchange and buy-back through book building.
- Disclosures, filing requirements and timelines for draft letter of offer have also been incorporated in the 2018 Regulations. The draft letter of offer now needs to be furnished within 5 working days of the public announcements as opposed to 7 working days according to the earlier position.
- Now, a company authorised to do the buyback of shares, will have to make a public announcement within two working days 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 the 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 around timelines with respect to various requirements under the buyback regulations.
- Every buy-back must be completed within a period of one year from the date of passing of the special resolution at general meeting, or the resolution passed by the board of directors of the company, as the case may be.
Source: Securities and Exchange Board of India
