Sebi mulls overhaul of buyback framework; seeks comments

In a consultation paper, the regulator proposed that open market buybacks through stock exchanges should be completed within 66 working days from the date of opening of the offer, instead of the earlier framework that allowed as long as six months duration.

Markets regulator Sebi on Friday proposed a series of changes to the buyback framework, including the re-introduction of open market share buybacks through stock exchanges and shortening execution timelines. In a consultation paper, the regulator proposed that open market buybacks through stock exchanges should be completed within 66 working days from the date of opening of the offer, instead of the earlier framework that allowed as long as six months duration. Sebi said a six-month timeline, recommended by the Primary Market Advisory Committee (PMAC), appeared ''relatively long'' and may make buybacks less relevant due to changing market conditions. The regulator also proposed retaining the existing requirement that companies should utilise at least 40 per cent of the earmarked buyback amount during the first half of the offer period. To improve shareholder communication, Sebi suggested that companies should mandatorily send intimation regarding buyback offers through electronic mode to all shareholders as on the date of the public announcement within one working day of such announcement. The regulator proposed doing away with the separate trading window mechanism that was earlier mandated for open market buybacks through stock exchanges. Sebi said buyback transactions could instead be executed through the normal trading mechanism, as the tax distinction between buyback investors and regular market investors no longer exists. Also, Sebi proposed freezing, at the ISIN level, the shares or specified securities held by promoters and their associates during the buyback period. However, such freezing would not apply for the limited purpose of tendering shares in buybacks undertaken through the tender offer route. The regulator also proposed inserting an explicit provision to ensure that companies do not announce buybacks that may lead to breach of minimum public shareholding (MPS) norms. Further, Sebi proposed aligning the minimum interval between two buyback offers with the provisions under the Companies Act, 2013, instead of maintaining a separate timeline under buyback regulations. To promote ease-of-doing-business, Sebi suggested dispensing with the mandatory appointment of merchant bankers for buybacks. Several responsibilities currently handled by merchant bankers, including filing of offer documents, disclosures and escrow-related operations, may instead be assigned to companies, stock exchanges, compliance officers and secretarial auditors. The Securities and Exchange Board of India (Sebi) has invited public comments on the proposals till May 29.