The Securities and Exchange Board of India (Sebi) has amended the buyback norms to ensure that all shareholders of a company get an equal opportunity for tendering their shares while also reducing the timelines.
According to the capital market regulator, any company making a buyback, through the tender offer route, will have to announce a ratio of buyback as is the case with a rights issue. The regulator is of the view that such a move will result in an ?equitable treatment? to all shareholders of the company.
The current norms require the company to only mention the number of shares that it intends to buyback and if a large shareholder tenders its entire holding then there is no room left for minority shareholders to participate in the offer.
The regulator, as part of its attempts to plug this loophole, has said that shares should be accepted based on entitlement of each shareholder, or in other words, in proportion to their holding. The company will also have to fix a record date for determining the shareholders and their entitlement.
The regulator has also reduced the time-frame for processes involved in a buyback offer, including Sebi observations, public announcement, submission of the draft letter to Sebi and payment to shareholders. While the offer can be kept open for 10 days, Sebi will issue observations within seven working days of receipt of draft letter of offer. Shareholders will receive the payment within 10 working days from the closure of the offer.
According to the Sebi board meet agenda papers, ?the proposed new timelines will result in reduction of time taken for completion of buyback ie up to payment of consideration to shareholders, from 63-114 days to 34- 44 days.?
Meanwhile, as part of the norms related to institutional placement programme (IPP), the regulator has clarified that promoter or promoter group who offer their shares in the placement cannot buy or sell shares of the company in the 12 weeks period after the offer. Further, such entities should not have bought or sold the shares of the company in the 12 weeks period prior to the offer too.
An IPP can be kept open for a minimum one day or maximum of two days and bids once made cannot be revised downwards or withdrawn. A reservation of minimum 25% will have to be made for mutual funds and insurance companies, subject to demand.