The government is worried that the provision will be misused, which is not without any basis. But these concerns can be addressed by good drafting, and in any case, there is a fair measure of consensus that reissue of shares bought back should not be permitted, as it could lead to price manipulation. There must also be a provision disallowing companies from issuing preference shares to fund a buyback, since in that case, managements can substitute voting shares with non-voting ones, thereby increasing their voting rights in the company.

But once the basic rules are inplace, it makes little sense to insist, as the DCA has done, that each and every case of share buyback should be referred to the government. One would have thought that this sort of micro management has long ago gone out of fashion, but it seems that ideas percolate only slowly into the murky depths of DCA offices. After all, once the shareholders of a company approve of a share buyback within the ambit of the rules to be framed, why on earth should it have to be approved by the government? Sections 370 and 372 of the Companies Act, which require government approval for advancing sums to and investing in other companies in excess of a certain percentage of a corporates net worth, have come in for stringent criticism.

And yet, the DCA seems to have no qualms about seeking further government interference in what is essentially a private affair between the management of a company and its shareholders. In any case, the government as well as the markets seem to be giving too much importance to this buying backof shares. Everyone knows that companies have set up a host of investment firms for the purpose of dealing with the shares of their own group companies. Not only is such dealing allowed, but there are no restrictions on either buying or re-selling such scrips. In all but name, buyback of shares is already a fact of life among corporates. And as far as the market is concerned, it needs to introspect how many companies have the resources to buy back their own shares at present.