FREQUENTLY ASKED QUESTIONS
SEBI (BUYBACK OF SECURITIES) REGULATIONS, 1998
These FAQs offer only a simplistic explanation/clarification of terms/concepts related to the SEBI (Buyback of Securities) Regulations, 1998 [“Buyback Regulations”]. Any such explanation/clarification that is provided herein should not be regarded as an interpretation of law nor be treated as a binding opinion/guidance from the Securities and Exchange Board of India [“SEBI”]. For full particulars of laws governing the buyback of securities, please refer to actual text of the Acts/Regulations/Circulars appearing under the Legal Framework Section on the SEBI website.
What is the manner in which the company can buy back its own shares?
The company can buy back its shares in any of the following manners: i. From the existing shareholders on a proportionate basis through the tender offer; ii. From open market through: a. Book building process b. Stock exchange; iii. From odd lot holders.
Can a company buyback its shares without passing shareholders’ resolution?
Yes. A company may buyback its shares without shareholders’ resolution, to the extent of 10% of its paid up equity capital and reserves. However, if a company intends to buyback its shares to the extent of 25% of its paid up capital and reserves/ then the same has to be approved by Shareholders Resolution as specified in Section 77A of Companies Act, 1956
Where can one get details of companies proposing to buyback their shares?
Listed companies are required to intimate the stock exchange of general meetings and resolutions passed thereof. Hence, information on companies proposing to buy back shares may be obtained from the stock exchanges. When the public announcement or offer document is filed with SEBI, the same is uploaded on the SEBI website, i.e., www.sebi.gov.in.
How does one tender one’s shares for buyback in the tender offer method?
The company will send you a tender/offer form. You will have to fill up the form as per the instructions of the company and enclose the documents asked for, by the company
How does one participate in the buyback in case one does not receive the tender/offer form?
You can make an application on plain paper stating your folio number, name, address, number of shares held, share certificate number, distinctive numbers, number of shares tendered, together with the original share certificate and tender the same at the collection centres/registrars, as mentioned in the public announcement.
Can you tender your shares for buyback if you are not a registered shareholder?
Yes, provided you submit the duly executed transfer deed for transfer of shares in your name, along with the offer form and other relevant documents as required for transfer, if any. The same should be sent to the registrar to the buyback offer.
What is the manner in which the company decides the acceptances from each shareholders?
In case the shares of the company are tradable compulsorily in demat segment, the acceptances from any investor shall be on a proportionate basis irrespective of the number of shares tendered in the buyback, and irrespective of whether shares are in physical or demat form. If the shares are not in compulsory demat segment, first the entire shares tendered being less than the minimum market lot shall be accepted in full. Thereafter, the acceptances will be on proportionate basis in a manner to ensure that the acceptances are in market lot. In such a case, a draw of lots shall be done, as in the case of public issues.
When will the shareholder receive intimation about acceptance of his shares?
The company is required to send intimation to the tenderers within 7 working days from the closure of the offer.
When will the shareholder receive the consideration/the share certificate in the tender offer method?
The company is required to send the above, within 7 working days from the closure of the buyback offer.
Can cash component of the escrow account in the buyback offer process be maintained in an interest bearing account? ( Inserted on 2-11-2015)
Yes, the cash component of the escrow account may be maintained in an interest bearing account. However, the merchant banker shall ensure that the funds are available at the time of making payment to shareholders.