A critical analysis of SEBI (Buy-Back of Securities) Amendment Regulations, 2026
Introduction
Buybacks have never been a simple corporate finance exercise in India. From the moment the board of a listed company deliberates on returning surplus capital to shareholders, a chain of regulatory obligations, third-party intermediaries, disclosure requirements, and governance considerations comes into play. Over the past eight years, SEBI has consistently refined the SEBI (Buy-Back of Securities) Regulations, 2018, progressively tightening timelines, eliminating methods prone to manipulation, and strengthening investor protections.
The 2023 Amendment was a watershed moment: it abolished the book-building route through open-market buybacks, compressed timelines aggressively, introduced escrow flexibility, and brought secretarial auditors into the compliance architecture. The Second Amendment of 2024 further fine-tuned the financial thresholds applicable to open-market buybacks through stock exchanges and eventually phased them out entirely with effect from April 1, 2025.
Now comes the SEBI (Buy-Back of Securities) (Amendment) Regulations, 2026, notified on July 1, 2026, and effective August 1, 2026. This amendment does not tinker at the margins. It makes a structural intervention, one that fundamentally rebalances responsibility between external intermediaries and the listed company itself. Read carefully, this amendment signals that SEBI is moving toward a principle that a company should own its buyback process, not merely commission it.
This article analyses every material change brought about by the 2026 Amendment, examines its practical implications for listed companies and their advisers, and offers a compliance roadmap for practitioners navigating this new regulatory terrain.
The Regulatory Background: A Framework Under Constant Evolution
Before appreciating what has changed, it is worth recalling where the framework stood.
Under the Regulations as they existed before the 2026 Amendment, a buyback could be executed through two broad routes: a tender offer to existing shareholders on a proportionate basis, or an open-market purchase, which itself encompassed two sub-routes, namely the book-building process and the stock exchange route. The 2023 Amendment effectively began the wind-down of the open-market stock exchange route, capping permissible buyback sizes at progressively lower levels (15%, then 10%, then 5% of paid-up capital and free reserves) and ultimately prohibiting the route altogether from April 1, 2025. This left companies with essentially two live mechanisms: the tender offer and the book-building process.
Throughout this framework, the Merchant Banker occupied a central and indispensable position. Whether it was filing the letter of offer, certifying regulatory compliance through a due diligence certificate, managing the escrow account, ensuring fund arrangements, overseeing extinguishment of securities, or submitting the final report to SEBI, the Merchant Banker was the thread that tied the entire transaction together. Its appointment was mandatory without exception.
What the 2026 Amendment does, through several coordinated changes, is to reintroduce the open-market stock exchange route (in a calibrated form), streamline investor communication, strengthen governance over promoter holdings during the buyback window, and, most significantly, make the appointment of a Merchant Banker entirely optional. These changes collectively reconfigure the buyback landscape in ways that require careful understanding.
Major Amendments: An Analysis
Reinstatement of Open-Market Buyback Through the Stock Exchange
Perhaps the most strategically significant change (though not the most structurally profound) is the partial revival of the open-market stock exchange route. The 2023 Amendment had closed this door shut from April 1, 2025. The 2026 Amendment quietly reopens it, effective August 1, 2026.
Under the new provision inserted in Regulation 17, a buyback offer through the stock exchange must open within four working days from the date of the public announcement and close within sixty-six working days from the date of opening of the offer. This is a structured, time-bound window — considerably tighter than the original six-month window that existed prior to 2023 but more workable than the 22-day window that had been in place just before the route was abolished.
Practically speaking, this reinstatement is significant for mid-sized listed companies that find tender offers procedurally cumbersome – particularly for smaller buyback sizes where the cost and complexity of a full tender offer process may be disproportionate. Companies with large retail shareholder bases may also prefer the flexibility of the stock exchange route, where participation is passive and market-driven rather than requiring shareholders to actively tender.
However, compliance officers must note that the open-market route carries its own set of obligations: daily reporting to stock exchanges, daily website disclosures, escrow account creation within two working days of the public announcement, restrictions on buyback price relative to market price, and constraints on weekly volume. The administrative burden of running a stock exchange buyback over sixty-six working days is non-trivial, particularly when internal IR teams are simultaneously managing quarterly results, analyst calls, and disclosure obligations.
The amendment also updates Regulation 16(iv)(b) to clarify the timeline for the public announcement — within two working days from the board resolution or special resolution results – aligning it explicitly with the disclosure clock that other routes already follow.
Direct Shareholder Intimation: A New Communication Obligation
In a departure from the earlier practice where awareness of a buyback was primarily through stock exchange dissemination and newspaper advertisements, the 2026 Amendment now mandates direct communication to shareholders.
Specifically, a new clause (ba) inserted in Regulation 16(iv) requires that for open-market buybacks through the stock exchange, the company must, within one working day from the date of the public announcement, send an intimation in electronic mode to all persons who were shareholders as on the date of the public announcement. A corresponding obligation is introduced in Regulation 22A(v) for the book-building route.
The significance of this provision is often underestimated. Previously, the onus was on the shareholder to be aware of a buyback through market disclosures. Now, the company must proactively reach out – directly, electronically – to every shareholder on record. In practice, this means coordinating with the Registrar and Share Transfer Agent to obtain a list of email IDs or contact details as of the announcement date, and ensuring an electronic intimation is dispatched within one working day.
For companies with tens of thousands of retail shareholders, this is a logistical exercise that needs to be built into the pre-announcement planning. The intimation content, while not specified in exhaustive detail in the regulations, must be adequate — and the company bears full responsibility for its accuracy and timeliness.
Promoter Group Freeze During Buyback: Closing a Governance Gap
One of the more governance-oriented changes in the 2026 Amendment is the introduction of an ISIN-level freeze on promoter and promoter group holdings during the buyback period.
The new clause (ea) inserted in Regulation 24 provides that all shares held by the promoter(s), promoter group, and their associates, in respect of which the buyback is undertaken, shall remain frozen at the ISIN level from the date of the board resolution (or special resolution results, as applicable) until the closing of the offer. The freeze applies both to tender offers and open-market buybacks, with one important carve-out: in a tender offer, the freeze does not apply for the limited purpose of actually tendering shares into the buyback.
The regulations also permit the invocation of pre-existing encumbrances (pledges created before the buyback period commenced), subject to the freeze on those shares continuing even after invocation. The company is required to instruct the depositories to give effect to this freeze.
What does this mean in practice? It means that promoters cannot sell their shares in the secondary market during the buyback window – even those shares not tendered into the buyback. They cannot transfer shares among promoter group entities in the open market. They cannot dispose of pledged shares unless the pledge was created before the buyback commenced.
This is a significant tightening. While the existing regulations already prohibited promoters from dealing in shares during the buyback period, the freeze at the ISIN level through a formal depository instruction provides an additional layer of enforcement. Promoters and their corporate secretaries need to be alert to this requirement well before the board passes the buyback resolution – because once the freeze is imposed, even routine treasury operations within the promoter group can be disrupted.
Companies where promoters hold pledged securities should, ideally, conduct a pre-buyback audit of all encumbrances to understand what may be triggered during the buyback window, and to seek appropriate advice on structuring the transaction accordingly.
Escrow Account for Open-Market Buybacks: From Discretion to Mandate
A textual but practically important change is the substitution of the word “may” with “shall” in Regulation 20(ii), which deals with the form in which the escrow account may be maintained for open-market buybacks through the stock exchange. Where the earlier provision gave the company a degree of discretion in choosing the form of the escrow, the amended provision converts this into a mandatory requirement – the escrow must be maintained in the specified forms (cash, bank guarantee, government securities, MF units in gilt or overnight schemes, or a combination thereof), subject to the margin requirements specified by the Board.
Simultaneously, the provisions dealing with bank guarantees in escrow accounts for open-market buybacks (Regulation 20(iv)) have been tightened. The bank guarantee must now be kept valid until thirty working days after the expiry of the buyback period or the completion of all obligations under the regulations, whichever is later – and must be returned by the Merchant Banker only after all obligations are fulfilled.
These changes reduce interpretive flexibility around escrow compliance and make the obligations clearer and harder to avoid.
The Most Significant Change: Optional Merchant Banker — A Paradigm Shift
It is the introduction of new Regulation 24A that truly sets the 2026 Amendment apart from all prior iterations of the buyback regulations. This single provision – deceptively short in its drafting – has the most far-reaching consequences for how buybacks will be structured, executed, and overseen going forward.
What the Regulation Says
Regulation 24A provides, in effect, that the appointment of a Merchant Banker is now entirely at the company’s discretion. A company undertaking a buyback – whether through tender offer, stock exchange, or book-building – may choose to dispense with the Merchant Banker entirely. If it does so, the obligations that would otherwise have been performed by the Merchant Banker are redistributed across three entities: the Company itself, the Secretarial Auditor, and the Statutory Auditor.
The redistribution is structured as follows:
- Filing the Letter of Offer and Public Announcement (along with fees), and ensuring their contents are true, fair, and adequate — assigned to the Company
- Certifying regulatory compliance and due diligence (the certificate previously issued by the Merchant Banker under Regulation 8(i)(aa) and 25(vi)) — assigned to the Secretarial Auditor
- Oversight and operation of the escrow account — including bank guarantees, cash deposits, approved securities, invocation rights, and release/forfeiture-related directions from SEBI — assigned to the Statutory Auditor
- Certification of adequacy of sell orders and VWAP of shares — assigned to Stock Exchanges
- Presence during extinguishment/destruction of securities in open-market buybacks — assigned to the Compliance Officer
- Certification/verification of compliance with extinguishment — assigned to the Compliance Officer
- Submission of the final report — assigned to the Company
- Ensuring availability of funds and firm financial arrangements — assigned to the Company
- Compliance with Companies Act provisions — assigned to the Company
The Schedule V fee structure is correspondingly amended to remove references to regulations that were tied specifically to the Merchant Banker’s filing obligations.
Why This is a Paradigm Shift
For the better part of three decades — across both the 1998 Regulations and the 2018 Regulations — a buyback transaction by a listed company in India was structurally intermediary-led. The Merchant Banker was not merely an adviser or facilitator; it was a statutory participant bearing its own legal obligations, certifying to SEBI that the offer was compliant, and standing behind the escrow with enforceable accountability. This structure reflected a regulatory philosophy that an external, SEBI-registered intermediary was necessary to provide an independent check on the company’s compliance.
The 2026 Amendment fundamentally abandons that philosophy — at least as a matter of compulsion.
The Case for the Change
The rationale is not difficult to understand. With each successive amendment, the role of the Merchant Banker was progressively whittled down. The 2023 Amendment removed the requirement for a draft letter of offer to be filed through the Merchant Banker in a tender offer. Disclosures were simplified. The public announcement filing became a company-level action rather than a Merchant Banker submission. What remained of the Merchant Banker’s role was increasingly formulaic — a certificate here, an escrow oversight role there — divorced from the substantive underwriting and advisory functions that characterise a Merchant Banker’s role in primary issuances.
Against this backdrop, making the appointment optional aligns with the broader ease-of-doing-business thrust that SEBI has consistently pursued. For smaller listed companies executing modest buybacks, Merchant Banker fees can represent a meaningful percentage of the total transaction cost. Eliminating this cost can make buybacks financially more viable for companies that would otherwise not pursue capital return due to disproportionate compliance costs.
The Weight of Responsibility Shifts Dramatically
However, the cost savings come with a commensurate increase in accountability – and this is where the real story lies.
When a Merchant Banker was engaged, the company had a SEBI-registered intermediary who shared regulatory risk. If the letter of offer contained inaccuracies, if the escrow was mismanaged, if the final report was delayed, the Merchant Banker had direct exposure to SEBI enforcement. That external accountability mechanism disappears when the company opts out of appointing a Merchant Banker.
In its place, the Company itself bears the responsibility for filing accuracy. The Secretarial Auditor (a Practising Company Secretary) now issues a due diligence certificate of the kind previously issued by the Merchant Banker, certifying that the buyback offer complies with the regulations and that the letter of offer contains the required information. The Statutory Auditor steps into the Merchant Banker’s shoes for escrow oversight — a role that requires understanding of securities market mechanics, not just financial statement auditing.
The implications are significant.
For Boards and CFOs: The decision to dispense with a Merchant Banker cannot be taken lightly or purely on cost considerations. A board that opts for a Merchant Banker-free buyback must ensure that its internal compliance infrastructure is robust enough to handle end-to-end execution — from public announcement to extinguishment certification. CFOs should model not just the Merchant Banker fee saved, but also the cost of enhanced secretarial and audit support that will be required in its place.
For Secretarial Auditors: The due diligence certificate under the 2026 framework is not a routine audit observation. It is a formal certification to SEBI that the offer is compliant. Practising Company Secretaries issuing this certificate must conduct a thorough pre-transaction review – examining the board resolution, verifying the financial thresholds under Section 68 of the Companies Act, checking for insider trading restrictions, reviewing the escrow creation timeline, and scrutinising every disclosure in the letter of offer or public announcement. The standards applicable to this certification are no different from those that applied to the Merchant Banker’s compliance certificate. Any professional who issues this certificate without adequate inquiry exposes themselves to significant regulatory and professional liability.
For Statutory Auditors: The escrow oversight function is operationally complex. The Statutory Auditor must now interface with the escrow bank, ensure timely funding, oversee invocation rights in case of non-compliance, and co-ordinate with SEBI if the company fails to fulfill its obligations. This is not a passive role. Statutory Auditors who take on this function without fully understanding its operational demands do so at considerable risk.
For Compliance Officers: The presence requirement during extinguishment and destruction of securities — and the consequent certification — is a formal obligation. The Compliance Officer becomes a key signatory in the regulatory chain. This demands that Compliance Officers be properly informed about the extinguishment process, the depositories’ procedures, and the timelines for furnishing the certificate to SEBI.
These implications, taken together, point to one clear conclusion: the 2026 Amendment does not reduce the compliance burden of a buyback. It redistributes it. Every stakeholder in the transaction now carries a more defined, more visible, and more accountable share of that burden than before.
Practical Impact Across Stakeholders
Listed Companies and Boards
Companies planning buybacks must now make a threshold strategic decision: appoint a Merchant Banker or proceed without one? This decision should be driven not just by cost but by the company’s internal capacity, the complexity of the transaction, the composition of the shareholder base, and the company’s history with regulatory filings. Given the heightened compliance architecture under the 2026 framework, companies would do well to consider engaging a professional like Practising Company Secretary with capital markets expertise to navigate the transaction. Whether or not a Merchant Banker is on board, the structuring of the offer, verification of regulatory thresholds, coordination across functions, and where applicable, the due diligence certification now assigned to the Secretarial Auditor, all demand the kind of focused professional attention that a buyback under the new framework commands.
Boards must ensure that the buyback resolution is carefully drafted and that all financial thresholds under the Companies Act and SEBI regulations are verified well before the public announcement. The internal transaction calendar covering every milestone from the board resolution to the final extinguishment certificate needs to be mapped out in advance with care and accountability. This is not merely administrative groundwork. It is the foundation on which the credibility and regulatory defensibility of the entire buyback rests.
Promoters
Promoters face the new ISIN-level freeze as a hard constraint. Groups that routinely conduct inter-se transfers, use promoter shares as collateral, or manage intra-group share pledging should audit their current shareholding structure before a buyback is triggered. Discovering a compliance issue mid-transaction, when freezes are already in place, is far more damaging than addressing it proactively.
For promoters who wish to participate in a tender offer, the freeze does not prevent tendering but it prevents any other dealing. This distinction matters enormously in practice and must be clearly understood by the promoter group and their advisers before the board resolution is passed.
Company Secretaries and Compliance Officers
The 2026 Amendment significantly elevates the role of the Practising Company Secretary in buyback transactions. Where a company opts not to appoint a Merchant Banker, the Secretarial Auditor’s due diligence certificate becomes the primary regulatory assurance before the offer goes to market. This is a responsibility that must not be treated lightly.
The Practising Company Secretary undertaking this certification must be thoroughly conversant with the buyback regulations, the relevant Companies Act provisions, insider trading restrictions, and LODR requirements. The certificate must be backed by a proper verification work programme and must reflect genuine diligence, not issued as a matter of form or convenience.
For compliance officers, the obligations under the 2026 framework are direct and personal. The extinguishment certification under Regulation 11 and the presence requirement under Regulation 21(iii) are no longer functions that can be delegated downstream. Their role in the compliance chain is now more visible, more documented, and more accountable than at any prior point in the history of these regulations.
Statutory Auditors
The escrow oversight function requires statutory auditors to step into territory that is operationally different from their usual remit. Those accepting this role should clearly document the scope of their responsibilities at the outset, maintain contemporaneous records of all escrow-related actions, and ensure that their engagement terms with the company reflect the full extent of their obligations.
Registrars and Share Transfer Agents
For tender offers, the Registrar’s role in verification of acceptances remains critical. With the Merchant Banker potentially absent from the picture, the Registrar must co-ordinate directly with the Company and the Secretarial Auditor on extinguishment timelines and certificate requirements.
Investors
The direct electronic intimation requirement is among the more investor-friendly changes in this amendment. Shareholders, particularly retail investors who hold securities through brokers rather than directly in demat accounts, stand to benefit from receiving direct communication about an ongoing buyback. This gives them a meaningful opportunity to make informed decisions about participation rather than relying entirely on intermediaries to pass on information.
That said, the practical effectiveness of this provision will depend significantly on the quality of data that companies maintain. Updated and accurate contact information in the share register is the basic condition for this requirement to deliver its intended purpose. Companies would be well advised to review and refresh this data as part of their pre-buyback compliance preparation.
Conclusion: The New Buyback Ecosystem Demands Greater Professional Rigour
SEBI’s 2026 Amendment to the Buyback Regulations is not merely a procedural update. It reconfigures the very architecture of how buybacks are executed and overseen in India. By making the Merchant Banker optional, SEBI has extended significant trust to listed companies, trusting them to self-regulate with the assistance of their internal governance professionals and statutory advisers, rather than relying on an external intermediary as the primary compliance check.
This is a logical evolution. As buyback transactions have become more standardised, as the regulatory framework has become more codified, and as listed companies have developed stronger internal governance capabilities, the mandatory intermediary model became increasingly difficult to justify on purely regulatory grounds. The 2026 Amendment acknowledges this reality.
But a lighter regulatory footprint demands heavier professional responsibility. A company that chooses to execute a buyback without a Merchant Banker must recognise that it has taken on not just the administrative work of compliance but the full spectrum of accountability that comes with it. Every decision, from the wording of the public announcement to the timing of escrow creation, from the accuracy of the shareholder intimation to the precision of the extinguishment certificate, rests with the company and its professionals. In this configuration, the Company Secretary, whether in employment or in practice, becomes the connective tissue of the entire transaction, holding together its regulatory, procedural, and documentary dimensions.
The reinstatement of the stock exchange route, the direct shareholder intimation requirement, and the ISIN-level promoter freeze all reinforce a single underlying message: transparency and accountability in buybacks must be demonstrable, not just asserted. These are precisely the domains where a trained and experienced professional like Practising Company Secretary brings the most value, not through form-filling, but through structured thinking, regulatory literacy, and professional judgment exercised at each stage of the transaction lifecycle.
For professionals advising on buyback transactions, this is the moment to build deeper competence. A buyback today is not just a capital reduction exercise; it is a governance signal. Markets interpret a buyback as a statement of confidence, and a poorly executed buyback, or one that triggers SEBI scrutiny due to documentation deficiencies, creates far more reputational damage than the buyback itself could have generated in goodwill. The professional who understands both the letter and the spirit of the 2026 framework is not merely a compliance resource. That professional is a strategic asset to the transaction.
Author Bio
