Sebi for tighter share buyback rule to make cos answerable
Companies which propose share buybacks merely to stabilize their sagging share price rather than for the stated purpose of improving shareholder value, may no longer find it easy to fool shareholders and the regulator.
January 03, 2013 / 11:11 IST
Moneycontrol.com
Companies which propose share buybacks merely to stabilize their sagging share price rather than for the stated purpose of improving shareholder value, may no longer find it easy to fool shareholders and the regulator. The Securities and Exchange Board of India has proposed stringent rules for share buyback so that company managements are held to their word.Sebi has issued a discussion paper on its proposals and sought public feedback by January 31.Following are the key proposals by the regulator:- Companies will have to buy back a minimum of 50 percent of the proposed buyback quantum.
- Buy-back of 15% or more of (paid up capital + free reserves) must be only by way of a tender offer method.
- Companies will have to complete the buy back in 3 months.
- Companies will have to put 25% of the maximum amount proposed for buyback in an escrow account as proof of their intent.
- Companies coming out with buyback programs not be allowed to raise further capital for a period of two years.
- Companies unable to buyback 100% of the proposed amount (or the proposed maximum number of shares) not be allowed to come with another buyback for a period of at least one year.
- Company shall disclose the number of shares purchased and the amount utilised to the exchanges on daily basis.
- Companies have to disclose on a monthly basis why the proportionate quantity was not bought during the month.
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