SEBI notified the Securities and Exchange Board of India (Buy-Back of Securities) (Amendment) Regulations,2023 on 7 February 2023. The aforementioned amendment regulations shall come into force on 30th day of the date of notification. Accordingly, the amendment regulations shall be made effective for all buy-back offers where the Board of Directors of the company approve resolution with respect to Buy-back on or after 30th day of the date of notification of this amendment in the official gazette (i.e. 9 March 2023).
As per Clause (vi) of Regulation 16 of the Buy-back Regulations, the buy-back through stock exchanges shall be subject to the restrictions on placement of bids, price and volume, as specified by SEBI. In this regard, in consultation with the Stock Exchanges, the following restrictions have been set-out for the companies undertaking buy-back through stock exchange route:
- The company shall not purchase more than 25% of the average daily trading volume (in value) of its shares or other specified securities in the ten trading days preceding the day in which such purchases are made.
- The company shall not place bids in the pre-open market, first thirty minutes and the last thirty minutes of the regular trading session.
- The company’s purchase order price should be within the range of ±1%from the last traded price.
In this regard, the company as well as its appointed broker shall ensure the compliance with the aforesaid provisions. The Stock Exchange shall monitor their compliance and in case of any instance(s) of such non-compliance shall impose appropriate fines and/or other enforcement actions as deem fit.
As per the sub-clause (c) of Clause (xi) of Regulation 9 and Clause (ii) of Regulation 20 of the Buy-back Regulations, the escrow account shall consist of cash and/or other than the cash. The portion of escrow account in the form of other than the cash shall be subject to appropriate haircut, in accordance with the SEBI Master Circular for Stock Exchange and Clearing Corporations dated 5 July 2021, as amended from time to time. Merchant Banker to buy-back offer is advised to ensure that the adequate amount after the applicable haircut is available in escrow account till the completion of all formalities of buy-back.