New Delhi: Capital Markets regulator Sebi on Wednesday imposed restrictions on the bid, price and quantity for companies undertaking share buybacks through the stock exchange route. SEBI said that under the restrictions, a company will not be able to buy back more than 25% of the average daily trading volume (in value) of its shares on the day such buyback is made.
Among others, the company shall not place bids in the pre-open market, first 30 minutes and last 30 minutes of the regular trading session and the firm’s buy order value should be within a range of 1% on either side from the last trade. worth.
SEBI asked companies and appointed brokers to ensure compliance of the provisions. The Stock Exchange will monitor their compliance and in case of any instance of such non-compliance, impose suitable penalty or other enforcement action as it may deem fit. Currently, companies have both stock exchange and tender offer options for share buyback.
With regard to margin requirements for deposits in the escrow account, SEBI stated that the account should consist of cash and/or other than cash. The portion of the escrow account in a form other than cash shall be subject to an appropriate haircut.
SEBI said that the merchant banker for the buyback offer shall ensure sufficient funds after the applicable haircut is available in the escrow account till all formalities of the buyback are completed.
In February, SEBI amended the securities buyback rules to streamline the buyback process, create a level-playing field for investors and promote ease of doing business. Under the rules, buyback of shares through the stock exchange route will be phased out, a move that will plug the loopholes associated with the existing mechanism.
Among others, the company shall not place bids in the pre-open market, first 30 minutes and last 30 minutes of the regular trading session and the firm’s buy order value should be within a range of 1% on either side from the last trade. worth.
SEBI asked companies and appointed brokers to ensure compliance of the provisions. The Stock Exchange will monitor their compliance and in case of any instance of such non-compliance, impose suitable penalty or other enforcement action as it may deem fit. Currently, companies have both stock exchange and tender offer options for share buyback.
With regard to margin requirements for deposits in the escrow account, SEBI stated that the account should consist of cash and/or other than cash. The portion of the escrow account in a form other than cash shall be subject to an appropriate haircut.
SEBI said that the merchant banker for the buyback offer shall ensure sufficient funds after the applicable haircut is available in the escrow account till all formalities of the buyback are completed.
In February, SEBI amended the securities buyback rules to streamline the buyback process, create a level-playing field for investors and promote ease of doing business. Under the rules, buyback of shares through the stock exchange route will be phased out, a move that will plug the loopholes associated with the existing mechanism.
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