SEBI changes buyback norms

SEBI notifies buyback norms under which it will be mandatory for companies to repurchase at least 50% of their offers

January 01, 1970 5:30 IST | India Infoline News Service
Capital market regulator SEBI (Securities and Exchange Board of India) notified buyback norms under which it will be mandatory for companies to repurchase at least 50% of their offers.

The new rules are aimed to safeguard the interest of public shareholders.

“The company shall ensure that at least fifty per cent of the amount earmarked for buy-back is utilized for buying-back shares or other specified securities,” SEBI said in a notification on 8th August.

The companies will now have to complete their buyback offers within six months. At present, the time frame to complete the buyback offers is 12 months.

Those not able to meet the target will be barred from launching another offer for one year.

The buy-back offer shall open not later than seven working days from the date of public announcement and shall close within six months from the date of opening of the offer, it added.

According to the new norms, the companies are being asked to keep 25% of the proposed buyback offer amount in an escrow account, so as to check companies from making non-serious offers that could wrongly influence the share prices.

It will also be mandatory for companies to buyback a minimum of 50% shares of the total targeted amount.

In case companies falter on some account, there will be a penalty and that could be of a maximum 2.5% on the funds lying in the escrow account.

In order to encourage buybacks using tender method, where larger amount of surplus funds are involved, SEBI said that companies are required to buyback at least 15% of targeted amount.

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