The Securities and Exchange Board of India has proposed sweeping changes to the buyback framework for listed companies, including reintroducing open market buybacks through stock exchanges, relaxing the mandatory merchant banker requirement and tightening safeguards around promoter participation and minimum public shareholding. According to reports from The Economic Times and Reuters, the proposals were released through a consultation paper aimed at reviewing and rationalising the SEBI (Buy-Back of Securities) Regulations, 2018. The regulator said the changes follow recommendations made by the Primary Market Advisory Committee (PMAC), along with Sebi's own internal deliberations to improve ease of doing business while strengthening investor protection. SEBI has invited public comments on the proposals till May 29, as reported by The Hindu BusinessLine.
One of the key proposals is to require companies to electronically notify shareholders about buyback offers within one working day of the public announcement, ensuring wider and quicker dissemination of information. As reported by The Economic Times and Reuters, Sebi has proposed a shorter maximum duration of 66 working days, reversing its earlier proposal that would have allowed buyback offers to remain open for up to six months. The regulator also wants to retain the existing requirement of deploying at least 40% of the earmarked amount during the first half of the offer period. In another significant relaxation, Sebi has proposed making the appointment of a merchant banker optional for buybacks, with several procedural and compliance-related responsibilities instead shifting directly to companies, stock exchanges and auditors. SEBI has proposed doing away with the separate trading window mechanism that was earlier mandated for open market buybacks through stock exchanges, allowing buyback transactions to be executed through the regular trading mechanism.
The proposals include several restrictions on promoter and promoter group participation, along with new requirements for minimum public shareholding compliance. According to The Economic Times and Reuters, Sebi has also suggested spacing requirements between two buybacks and separate trading window provisions. The regulator has further proposed freezing promoter shareholding at the ISIN level during the buyback period to prevent trading activity, with such freezing not applying for the limited purpose of tendering shares in buybacks undertaken through the tender offer route. Sebi has also suggested 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. The regulator has 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.
