Buy back of shares is a process by which a company that has issued its shares buys such issued shares back from the subscribers.
In theory, buy back process seems quite simple and straightforward. The reality, however, is quite different. It is not easy or a random thing as in order to buy back shares. Companies need to comply with applicable capital market regulations and further internal governing documents should permit the Company for buy back of shares. A buyback process goes through a lot of internal / external processes, approvals, paperwork and what not.
The Securities Board of India has made some revisions to the existing rules applicable to buy back shares.
Some Key changes brought about in SEBI Buy-Back (Amendment) Regulations,2023, which have been made effective from 9th March 2023 are highlighted as under:
a) Firstly, buy back of shares through open market buy out or book building process are still permitted subject to applicable rules. Book-building process is the channel for disclosures, filing requirements and timelines for buy-back which to be remain open for a minimum of two trading days which provides a window for retail investors to take a shot at the bidding at buy back price.
b) Buyback of shares from odd-lot holders is removed. To provide more flexibility to companies, SEBI is on course to confer companies with an option to cut down number of securities intended to buy back and simultaneously to scale up the buy back price to maximum.
c) Timeline of 15 days is cut down to seven days for extinguish and destruction of securities certificates in presence of sectorial audit.
d) Public display of the announcement of buy back of shares on websites of issuer company, respective stock exchange, and merchant banker is mandatory.
e) The lower of standalone or consolidated financial statement of the company shall be the basis to establish limits of buyback of shares.
