CORPORATE LAW UPDATE
06th March 2023
Issue No. 19/22-23
THE SECURITIES AND EXCHANGE BOARD OF INDIA NOTIFIESTHE SECURITIES AND EXCHANGE BOARD OF INDIA (BUY-BACK OF SECURITIES) (AMENDMENT) REGULATIONS, 2023
By agazette notification bearingno. SEBI/LAD-NRO/GN/2023/120dated 07thFebruary, 2023, the Securities and Exchange Board of India (“SEBI”) has notified the Securities and Exchange Board of India (Buy-Back of Securities) (Amendment) Regulations, 2023amending the Securities and Exchange Board of India (Buy-back of Securities) Regulations, 2018(“SEBI Buy-back Regulations”).
The key amendments brought about by Amendment Rules are as follows:
- A company shall now consider paid up share capital and free reserves as per the standalone or consolidated financial statements, whichever sets out a lower amount for calculating the limits given under SEBI Buy-back regulations.
- A company has been provided with a variety of ways to proceed with the buy-back. However, SEBI has put an end to buy-back via odd lots method by deleting its provisions from the SEB Buy-back regulations.
- A company can buy-back its own shares through open market through the stock exchanges. However, SEBI via this notification has notified that companies shall not be allowed to buy-back its shares via open market through stock exchanges with effect from April 1, 2025.
- Company can buy-back its shares from the open market through stock exchange not more than 50% of the paid-up capital and free reserves of the company till March 31, 2023; 10% of the paid-up capital and free reserves of the company till March 31, 2024; 5% of the paid-up capital and free reserves of the company till March 31, 2025.
- A separate window shall be created by the concerned stock exchange for buy-back through stock exchanges.
- It has become mandatory for the companies to obtain prior consent of the lenders in case of any breach of any covenant with such lender(s) and disclose the same in the letter of offer prepared by the company in accordance with the SEBI Buy-back Regulations.
- The company shall file a copy of the public announcement in electronic form, with the Board and also with the stock exchanges where the securities of such company are listed and such stock exchanges and the same shall also be placed on the website of such stock exchanges, Merchant bankers and the company.
- The escrow account that the company is required to maintain for buy-back through stock exchanges can be in addition to the old provisions be in the form of deposit of frequently traded and freely transferable equity shares or other freely transferable securities with appropriate margin with the merchant banker; or government securities; or units of mutual funds invested in gilt funds and overnight schemes.
- The company shall be required to complete the payment of consideration of buy-back within 5 working days from the date of closure of the buy-back offer.
- SEBI has added new provisions for the methodology to be followed by the companies for acceptance of bids.
- The company has been given an option to increase the maximum buy-back price and decrease the number of securities proposed to be bought back in such a way that the aggregate size of the buy-back remains the same.
The Amendment Regulations can be accessed here
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