1. Applicability

SEBI (Buy- Back of Securities) Regulations, 1998 apply to buy-back of shares or other specified securities of a company listed on a stock exchange. However, buy-back is not permitted so as to delist its shares or other specified securities from the stock exchange.

2. Methods of buy-back

The SEBI regulations prescribe following methods of buy-back:

a. Proportionate method from existing security holders

b. Open market method through

1. Book building process

2. Stock exchange

c. Odd lot purchase.

d. Securities buy-back from employees who were issued securities under scheme of stock option or sweat equity.

3. Restrictions

A company shall not buy-back its shares from any person through negotiated deals whether or through:

• the stock exchange; or

• spot transactions; or

• any private arrangement

4. Disclosures and Additional Disclosures

The explanatory statement to be annexed to the notice for the general meeting pursuant to section 173 of the Companies Act shall contain disclosures as specified in Schedule II, Part A and further following disclosures:

(a) the maximum price at which the buy-back of shares or other specified securities shall be made and authority vested in the Board to determine subsequently the specific price at which the buy-back may be made at the appropriate time;

(b) if the promoter intends to offer their shares or other specified securities,

1. the quantum of shares or other specified securities proposed to be tendered, and

2. the details of their transactions and their holdings for the last six months prior to the passing of the special resolution for buy-back including information of number of shares or other specified securities acquired, the price and the date of acquisition.

5. Special resolution

A copy of the resolution passed at the general meeting under sub-section (2) of section 77A of the Companies Act, shall be filed with SEBI and the Stock Exchanges within seven days from the date of passing of the resolution.

6. Board resolution

A copy of the Board resolution shall be filed with SEBI and the Stock Exchanges within two working days of the date of the passing of the resolution.

7. Buy-back through Tender Offer

Buy-back from its existing share holders shall be on a proportionate basis subject to condition that 15% of the number of securities which the company proposes to buy back or number of securities entitled as per their share holding, whichever is higher, shall be reserved for small share holders.

8. Offer Documents

Public announcement shall be made within two working days from the date of resolution in:

• One English National Daily,

• One Hindi National Daily and

• Regional language daily

A copy of the public announcement along with the soft copy is to be submitted to SEBI simultaneously through a merchant banker.

The company is required to file within five working days of the public announcement a draft-letter of offer along with soft copy with SEBI along with a declaration of solvency in Form 4A.

SEBI may give its comments on the draft letter of offer within seven working days of the receipt of the draft letter of offer.

9. Offer Procedure

The Company has to announce a record date for the purpose of determining the entitlement and the names of the security holders.

The letter of offer along with the tender form is required to be dispatched to the security holders within five working days from the receipt of communication of comments from SEBI.

The date of the opening of the offer is required to be within five working days from the date of dispatch of letter of offer.

The offer is required to remain open for a period of 10 working days.

The company is required to accept shares or other specified securities from the security holders on the basis of their entitlement as on record date.

The shares proposed to be bought back are divided into two categories:

• Reserved category for Small Share holders

• General category for Other Share holders

After accepting the shares or other specified securities tendered on the basis of entitlement, shares or other specified securities left to be bought back, if any in one category are required to:

• First be accepted in proportion to the shares or other specified securities tendered over and above their entitlement in the offer by security holders in that category; and

• thereafter from security holders who have tendered over and above their entitlement in other category

10. Escrow account

The company is required to deposit money in an escrow account following manner:

The escrow account shall consist of:

1. cash deposited with a scheduled commercial bank, or

2. bank guarantee in favour of the merchant banker (1% Extra in cash), or

3. deposit of acceptable securities with appropriate margin, with the merchant banker (1% Extra in cash), or

4. a combination of (a), (b) and (c) above

11. Payment to share holders

A company is required to complete the verifications of offers received and make payment within seven working days of the closure of the offer.

12. Extinguishment of certificate

Securities bought back shall be extinguished/physically destroyed within 15 days of the date of acceptance of the securities in the presence of a Registrar to issue or the Merchant Banker and the Statutory Auditor. All the securities bought back shall be extinguished within 7 days of the last date of completion of buy-back.

13. Buy-back through Stock Exchange

1. The resolution shall specify the maximum price at which the buyback shall be made.

2. The buy-back of the shares shall not be made from the promoters or persons in control of the company.

3. The company shall appoint a merchant banker and make a public announcement.

4. The public announcement shall be made at least seven days prior to the commencement of buy-back.

5. A copy of the public announcement shall be filed with SEBI within two days of such announcement.

6. The public announcement shall also contain disclosures regarding details of the brokers and stock exchanges through which the buy-back of shares or other specified securities would be made.

7. The buy-back shall be made only on stock exchanges having nationwide trading terminals, i.e. BSE and NSE.

8. The buy-back of shares or other specified securities shall be made only through the order matching mechanism except ‘all or none’ order matching system and the identity of the company as a purchaser shall appear on the electronic screen when the order is placed.

9. The company and the merchant banker shall submit the information regarding the shares bought-back, to the stock exchange on a daily basis and publish the said information in a national daily on a fortnightly basis and every time when an additional 5% of the buy-back has been completed.

14. Buy-back through Book Building

1. The resolution shall specify the maximum price at which the buy-back shall be made.

2. The company shall appoint a merchant banker and make a public announcement.

3. The public announcement shall be made at least 7 days prior to the commencement of the buy-back.

4. The deposit in the escrow account shall be made before the date of the public announcement

5. A copy of the public announcement shall be filed with SEBI within two days of announcement.

6. The number of bidding centres shall not be less than thirty and there shall be at least one electronically linked computer terminal at all the bidding centres.

7. The offer for buy-back shall remain open for a period not less than fifteen days and not exceeding thirty days.

8. The final buy-back price, which shall be the highest price accepted, shall be paid to all holders whose shares or other specified securities have been accepted for buy-back.

15. Obligations of the Company

1. The letter of offer, the public announcement of the offer or any other advertisement, circular, brochure, publicity material shall contain true, factual and material information and shall not contain any misleading information and must state that the directors of the company accepts the responsibility for the information contained in such documents.

2. The Company shall not issue any shares or other specified securities including by way of bonus till the date of closure of the offer.

3. The Company shall pay the consideration only by way of cash.

4. The Company shall not withdraw the offer to buy-back after the draft letter of offer.

5. The promoter or the person shall not deal in the shares or other specified securities of the Company during the period of the buy-back offer is open.

6. No public announcement of buy-back shall be made during the pendency of any scheme of amalgamation or compromise or arrangement.

7. The Company shall nominate a compliance officer and investors service centre for compliance with the buy-back regulations and to redress the grievances of the investors.

8. The particulars of the security certificates extinguished and destroyed shall be furnished by the company to the stock exchanges within seven days of extinguishment and destruction.

9. The company shall not buy-back the locked-in shares and non-transferable shares.

10. The Company shall within two days of the completion of buy-back issue a public advertisement in a national daily giving specified disclosures about the buy-back.

16. Obligations of the Merchant Banker

1. The company is able to implement the offer.

2. The provision relating to escrow account as referred to in regulation 10 has been made.

3. Firm arrangements for monies for payment to fulfil the obligations under the offer are in place.

4. The public announcement of buy-back is made in terms of the regulations.

5. The letter of offer has been filed in terms of the regulations.

6. The merchant banker shall furnish to the Board a due diligence certificate which shall accompany the draft letter of offer.

7. The merchant banker shall ensure that the contents of the public announcement of offer as well as the letter of offer are true, fair and adequate and quoting the source wherever necessary.

8. The merchant banker shall ensure compliance of section 77A and section 77B of the Companies Act, and any other laws or rules as may be applicable in this regard.

9. Upon fulfilment of all obligations by the company under the regulations, the merchant banker shall inform the bank with whom the escrow or special amount has been deposited to release the balance amount to the company.

10. The merchant banker shall send a final report to the Board in the form specified within 15 days from the date of closure of the buy-back offer.

17. Fees payable to SEBI

While submitting the offer documents or a copy of the public announcement to SEBI, fees have to be paid as per the size of the buy-back, as follows:

(Note: The above fee table was substituted vide amendment regulations dated 31st March, 2008.)